Sheikh approves amnesty scheme with few observations

ISLAMABAD: Dr Abdul Hafeez Sheikh, federal minister for finance and revenues, has, in principle, approved the amnesty scheme with a few observations, which will be further fine-tuned by incorporating his viewpoint before tabling three bills in the upcoming session of the National Assembly, scheduled to meet on November 12, said sources.

The Federal Board of Revenue’s team led by its chairman Ali Arshad Hakeem briefed the finance minister about the proposed amnesty scheme on which the minister called for ensuring equity, effective enforcement and broadening the tax base as major objectives to enhance tax-to-GDP ratio from nine percent of GDP to 15 percent of GDP.

“We have asked the FBR to finalise its arrangements by incorporating views of all sides,” said Dr Sheikh, when asked to comment on Wednesday’s meeting with the FBR team.

The FBR team informed the finance minister that there are massive flaws in the data compiled by the PRAL, a subsidiary of the FBR, which shows in its developed software ‘Mahasil’ that there is an individual taxpayer who had to pay Rs440 billion in 2011. This is simply ridiculous exposing inefficiencies in the data development compiled by the FBR, said sources.

When contacted, Hakeem said that the FBR has identified 3.5 million individuals who would be taxed at all costs as the FBR possessed the details of their income, assets, bank accounts and foreign visits abroad. “We will ensure equity and this exercise will be aimed at broadening the tax base,” he added.

The database, he said, would allow one time entry in the normal tax system and if one such potential non-filer would not avail this facility, then he would be in deep trouble, he said.

The sources said that the FBR chairman also proposed that the board should be allowed to put the names of three million potential non-filers on the exit control list (ECL) prior to launching this scheme. The FBR also proposed to introduce one general amnesty scheme by offering people to clear their money up to Rs10 million by paying just Rs40,000 in the first month, Rs50,000 in the second month and Rs60,000 in the third month.

For clearing assets, the FBR proposed to clear them by paying just one percent of its value. Third bill proposed by the FBR will be related to whistle blower where the FBR will offer 30 percent to those who will provide solid information about the tax dodgers.

However, the sources said that the finance minister was also informed that there are rampant entry and exit from the taxation system with the reasons individual taxpayers preferred to go outside the taxation system in connivance with the tax authorities.

According to the data presented before the finance minister, there are 137,684 taxpayers who have been non-filers since 2007. There are 104,326 taxpayers who did not file returns after 2008, 141,297 who did not file returns after 2009, 218,564 who did not file returns after 2010 and 557,022 who were non-filers this year.

Of 3.58 million national tax number (NTN) holders, there are only 1.02 million return filers who can be tracked with the existing PRAL data. The data also shows that with the increase in taxable ceiling exemption from Rs200,000 to Rs300,000 there are only 8,825 salaried people who came out of the tax net and only 16,000 in 2011 when this limit was further increased.

With the faulty data, it shows that despite increasing exemption limit, the FBR has collected Rs6 billion from the salaried class.

The sources, however, said that after incorporating ideas given by the finance minister, three bills will be sent to the Law Division for approval in the next few days.

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