OICCI calls for radical steps to check tax evasion

ISLAMABAD: The Overseas International Chamber of Commerce and Industries (OICCI) has recommended to the finance teams working on the upcoming budget 2021-22 for seizure of local assets or levy appropriate taxes if any person holds any assets abroad.

The OICCI top office bearers, who held a meeting with Minister for Finance Shaukat Tarin and his economic team and recommended for bringing illicit trade into tax ambit especially tax evaded cigarettes that could fetch Rs 70 billion for the national kitty per annum, revising Afghan Transit Trade Agreement (ATTA) and registering all income earners into the tax net.

“Appropriate laws should be drafted to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any assets outside the country without justified source of income,” the OICCI recommended to the government. The Overseas Investors Chamber of Commerce and Industry comprises top 200 foreign investors in Pakistan belonging to 35 countries.

It also recommended, that as Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes it must hold regular coordination with relevant authorities of countries, considered as tax heavens for stashing illegal wealth, for publicly sharing cases of tax evasion.

The OICCI top office bearers apprised the Minister for Finance Shaukat Tarin and his economic team that the illicit cigarette sector holds a staggering 37 percent share in the market.

They were of the view that the Track and Trace software would not solve all the problems related to the sector therefore the government would have to take a politically tough decision to bring Rs 70 billion additional money into the tax net.

It suggested imposing Rs 500 per kg adjustable Advance Tax on per kg tobacco leaf at the level of Green Leaf Threshing Process (GLTP) units. This tax could make illicit cigarettes financially unviable.

The OICCI also recommended revising the ATTA to protect the revenue base of Pakistan without hurting the real spirit of such agreements. It recommended establishing a basis of collecting duty/taxes at the point of entry into Pakistan for the the Afghanistan Government, fix import value in consultation with the brand owners in Pakistan and checking of containers returning from Afghanistan to ensure they are empty. There should be a negative list of items not utilized in Afghanistan but that eventually make their way into Pakistan and facilitating exports to Afghanistan with simplified FBR procedures and border control authorities. There is need to introduce stringent controls for illicit trade, introduce tighter penalties across the whole value chain. They also asked for introduction of a special task force to raid retailers and manufacturers to confiscate and destroy illicit stocks.

The Custom valuation be done by latest methods of valuation and taking local legal brand owners on board, checking imports of counterfeit products and making import data public property to ensure transparency, which will also help in taking over of goods under section 25A of the Custom Act, 1969.

All the income earners should be registered and must obtain NTN. The FBR should simplify the tax structure by implementing tax reforms and also hold conferences with tax and legal experts to review existing laws for increasing number of taxpayers and taxable entities. The tax authorities should use technology, data analytics including Artificial Intelligence tools and make effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “Filers”, with mandatory submission of annual income tax/wealth returns and wealth reconciliation statements.

The FBR and SBP must devise a framework to ensure all customers of financial institutions whose accounts show turnover in excess of PKR two million or more during the year, have filed a tax return and wealth statement. This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts. The art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc. should provide names and addresses of the respective persons involved in the business to the FBR on a quarterly basis. Thereon, the FBR should pro-actively pursue potential taxpayers rather than waiting for the tax returns to be filed. The Section 111(4) of ITO 2001, last amended in 2018, should be further reviewed to restrict tax free inward foreign remittances to immediate family members only.

The OICCI also recommended eliminating the culture of Amnesty Schemes as it discourages the honest taxpayers. It called for levying severe, and visible, penalties to punish tax evaders, starting with evasions of over Rs one million.