The Senate Standing Committee on Finance criticized the FBR for taxpayers, who received notices worth many times their annual sales amid a sharp increase in tax demand of Rs 2.4 trillion.
“I was shocked to see that the FBR issued a tax recovery notice of Rs65 million in a case where the person’s total turnover was Rs5 million per year,” said Senator Talha Mehmood, Chair of the Standing Committee.
The officers who issued such ridiculous notices should be handcuffed, as the FBR was blackmailing taxpayers through audit notices, Mehmood said.
Mehmood instructed FBR to report on the inclusion of a director of a tobacco company on the fiscal anomalies committee, which was created this week.
FBR sources said tax demand had jumped to Rs 2.4 trillion, which was almost half of FBR’s annual target of Rs 4.963 trillion. Just two months ago, the figure was Rs 1.7 trillion, according to the Ministry of Finance’s monthly economic update.
“Existing taxpayers are planning to flee due to FBR’s haughty and FBR is talking about expanding the tax base,” said Sohail Altaf, a businessman.
The development arose amid the growing fear of the business community regarding the budget proposals to arrest taxpayers on suspicion of income concealment and link the exemption to the payment of 100% of the tax demand.
The standing committee also expressed reservations about the proposed amendment to Section 127 of the Income Tax Ordinance, which created a link between the tax requirement and the right of appeal. According to the amendment in Section 127 taxpayer can’t appeal unless the taxpayer has paid the amount of tax due under Section 137.
The proposed amendment to Section 127, if passed, would violate the Constitution — the country’s supreme law, said Dr. Ikramul Haq, a Supreme Court attorney, and tax expert. He feared that this would also give FBR IRS officials carte blanche to collect 100% of the contested tax claim held by the Appeals Commissioners and that it would also be demolition of Article 10A of the Constitution.
Haq raised the question of whether FBR would pay the refund immediately if the order was in favor of the taxpayer.
He said it had become almost impossible, in most cases, to get relief at the first instance of appeal. The Commissioners of Appeals of the Inland Revenue work directly under the administrative control of the FBR, which is also against Article 175 (3) of the constitution.
The standing committee awaited a decision on a proposed budget to reduce the regulatory tariff on molasses exports. Pakistan Sugar Industries Association president Iskandar Khan has stirred the tariff cut, saying it would discourage ethanol exports, which currently stand at $500 million.