FBR suffers Rs4bn loss due to loophole in tax amnesty scheme

Ineligible taxpayers manage to avail the Voluntary Tax Compliance Scheme

ISLAMABAD: The Federal Board of Revenue (FBR) has suffered a loss of Rs4 billion owing to ineligible taxpayers who availed the Voluntary Tax Compliance Scheme (VTCS), Profit learnt on Sunday.

According to details, the FBR’s Intelligence and Investigation (I&I) Inland Revenue (IR) has revealed that 13,401 taxpayers filed 37,469 VTCS returns whereas most of them were ineligible for the scheme.

The I&I-IR also highlighted a number of discrepancies such as the majority of taxpayers not obtaining sales tax return numbers.

Sources claim that there were loopholes in single page returns prepared by tax department as well as the Pakistan Revenue Automation Ltd. (PRAL) due to which ineligible people availed the amnesty scheme.

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The Ministry of Finance had introduced the VTCS scheme through Income Tax (Amendment) Act, 2016, in which two types of assessments had been given in order to document and trace the activity of an individual trader.

The government had defined the trader as an individual or an association of persons (AOP) buying goods or merchandise and selling the same without further processing, and providing business related after sales services by doing repair jobs.

In the first assessment in 2015, the government had offered traders to pay 1 per cent tax on up to Rs50 million working capital if the person had not filed income tax returns during any of the previous ten tax years before December 31, 2015.

In 2016, the taxpayer was bound to declare turnover, which should not be less than three times the working capital declared in tax year 2015, and pay tax according to slab rates which ranges from 0.2pc to 0.1pc of the turnover.

Furthermore, the taxpayers were also bound to pay at least 25pc more tax than paid in the immediately preceding year under the scheme in 2017 and 2018.

In the second assessment, taxpayers with an NTN who had filed returns during any previous ten tax years had to be assessed in further two categories with regard to paying 25pc higher tax in 2015, comparable to tax year 2014.

The taxpayers were also eligible for turnover tax according to slab rates under the VTCS scheme, besides being entitled to take credit of imputable income for the purpose of wealth statement from 2016 to 2018. 

In addition, the majority of traders have not filed returns from 2016 to 2018 despite the fact they are bound to do so.

Sources said that there were ambiguities in the amnesty scheme announced by former finance minister Ishaq Dar, such as a trader having working capital of Rs500 million can file 10 different returns under names of related persons.

They said that senior officials of FBR consider this a waste of time due to which the bureau chairman has yet to take any action.

This scribe requested FBR spokesperson Asad Tahir Jappa for comment but no reply was received till the filing of this story.

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Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]

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