Caretaker govt rejects move to punish those who fail to integrate data with FBR

ISLAMABAD: The caretaker government has rejected a proposal of the Federal Board of Revenue (FBR) to promulgate the Documentation of Economic Transactions Ordinance 2023 whereby tax authorities recommended penalties against 145 public and private sector organisations that failed to integrate the data with tax machinery.

The Ministry of Law and the caretaker government contends that they could not impose fiscal measures through an ordinance, advising the FBR to present its proposal to the incoming elected government.

This rejected ordinance explicitly identified all those 145 state-owned and private-sector departments which were bound to integrate the data but in case of failure, imposition of heavy penalties was proposed. The FBR had proposed a penalty of up to Rs1 million in case of default the first time if any organisation failed to integrate the data with the Board but the penalty amount could be doubled for each subsequent default.

The FBR also proposed that where the default as specified was committed and proved that it was done in connivance of or is attributable to any neglect on the part of any director, manager, secretary or other officer of the organisation, all such shall be guilty of default and shall be jointly and severely liable for penalty, which may extend up to rupees two million for each default.

The Inland Revenue Officer holding jurisdiction over the organisation would provide an opportunity of being heard through an order in writing impose the penalty and shall serve upon the person a notice of demand specifying the sum payable and thereupon such sum shall be paid into government treasury within the specified time in the notice.

An ordinance, which was proposed by the FBR and sent out to Ministry of Law for vetting, stated that “Whereas there is large scale non-reporting and under-reporting of assets held, income earned, personal and business expense incurred, economic activities carried out, sales and purchase made, taxable services provided or rendered and manufacturing carried out, it is expedient to provide for documentation of said economic transactions and for matters connected therewith or incidental thereto.

“And Whereas the National Assembly stands dissolved and Senate is not in session and the president of Islamic Republic of Pakistan is satisfied that circumstances exist which rendered it necessary to take immediate actions.

“Now therefore in exercise of power conferred by Clause (1) of Article 89 of the Constitution of the Islamic Republic of Pakistan, this ordinance shall be called the Documentation of Economic Transaction Ordinance 2023.

“The economic transaction means a transaction for exchange, transfer of title, ownership of assets, goods or services involving economic value provided by one person to another person including but not limited to the transaction of (i) tangibles including all types of physical goods manufactured, produced, imported or exported; (ii) intangibles including all types of services, rights, interests, license by whatever name called (iii) unilateral transfers including gifts, personal remittances, and other transactions or unrequired transfers which do not involve any claim for repayment; (iv) capital transfers including capital receipts and capital payments; (v) any activity carried out by any person for sale and purchase of any asset, payment for any expenditures, deriving of any income, profits or any gain; (vi) any approval, authorization, permission, registration, access, concessions granted for any purpose and any financial transaction and (vii) any other transaction as notified by the Board for the purpose of this ordinance.

“Real Time Sharing of Economic Transactions: Every Organisation specified in the ordinance shall furnish the information to the Board related to economic transactions as carried out by any person with the organisation. The Board may develop and specify dedicated IT platform through which the organisations shall be required to integrate and share in real time and electronically, economic transactions against a unique identifier on the format as may be specified by the Board.”

There was a clause of confidentiality and removal of difficulties in the ordinance but the caretakers refused to promulgate an ordinance to this effect.