Amnesty for tax defaulters

[p(-)0ENiX]

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Amnesty for tax defaulters
Bilal Hassan - 27/4/14​

THE Sindh Revenue Board has announced an amnesty for persons who have failed to pay sales tax on services since July 1, 2011. According to the new tax policy, only the principal amount of sales tax, along with a 5pc default surcharge, is required to be paid. The penalty has been waived to the extent of 95pc of the default surcharge.

This taxation policy of the Sindh Revenue Board (SRB) appears to be well-directed, and is a timely move in view of its limited enforcement capacity as the board started collecting sales tax on services only a few years back, after the 18th constitutional amendment. By virtue of this amnesty, the board may fill the tax gap created by its enforcement of tax laws.

More importantly, the amnesty is likely to provide relief to businesses, especially small enterprises, operating in the service sector. First, a person providing taxable services is required to be registered under the Sindh Sales Tax on Services Act 2011. Second, a registered person providing taxable services has to maintain records of taxable and exempt services, etc.

Without doubt, these requirements increase the cost of doing business. As the provincial legislation on collection of sales tax on services is not sophisticated enough, the businesses, in particular the smaller ones, might fail to maintain requisite records during the initial phase.

The dispute between the provinces on mode of collection of sales tax on services could be another factor to be discussed in connection with this amnesty scheme. The provinces have different opinions over whether to collect sales tax on services on the basis of origination or destination.

In provincial laws regarding sales tax on services, the chargeability of sales tax on the value of the taxable service — whether it is to be based on the principle of origination or destination — has not been mentioned.

Nevertheless, Sindh argues that services originating from its territorial jurisdiction should be taxed under the Sindh Sales Tax on Services Act 2011, whether they were delivered or consumed in other provinces. On the other hand, Punjab and KP are of the opinion that service should be taxed where it is delivered or consumed.

Such divergent opinions on mode of sales tax collection on services are reported to have led to increased litigations. As a result, a sizeable portion of sales tax revenue from services may not be realised.

Tax amnesty is common in developing countries where a large segment of the economy is undocumented, and where governments try to bring more people on the tax roll every year through such measures. Such amnesties reflect weak enforcement and are designed to bridge the resultant tax gap.

Earlier, the federal government had also introduced a sales tax amnesty scheme, giving the option to defaulters of sales tax to pay 2pc of the outstanding liability. A number of sales tax defaulters benefited from this scheme.

As the provinces have started collecting sales tax on services (with the exception of Balochistan), the federal government has amended the Sales Tax Act 1990 through Statutory Regulatory Order No.212 (I)/2014, dated March 26, 2014. The SRO allows registered persons to adjust input tax paid on services to the provincial governments against the output tax payable on goods to the federal government.

This SRO is retrospectively applicable from July 1, 2013 — something very crucial. Otherwise, sales tax charged on services would have the effect of direct taxation rather than that of a value-added tax without input tax adjustment.

The writer is a graduate in taxation policy and management from Keio University, Japan

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[AZADPAKISTAN2009]

There should be no amnesty instead Prison Term should be announced fro people and property seizure

• Only if you earned income while residing in Pakistan (Residents)

For None Residents there should be flat rate fee yearly $100 / tax year

Pakistan only has two choices libral but "Strong willed" Imran Khan

or

Qadri and Jalsa and party in street

 

[IceCold]

Only the middle salaried class pays taxes which is making this class to be extinct. Lower class be paisa zayda kama rahi ha but give no tax or upper class to kama he rahi ha and they have the government amnesties to protect them. Tax chori kero or phir amnesty hasil ker loo. Wah ra wah

 

[p(-)0ENiX]

@AZADPAKISTAN2009 @IceCold

I have mixed feelings regarding this tax amnesty. On one hand there is no doubt that there shouldn't be a need for a tax amnesty in the first place provided the law is followed & effectively enforced, but on the other hand, there do seem to be a lot of defaulters that may not change their ways without this amnesty. So in this particular scenario, the amnesty could be beneficial provided people & organisations involved continue to pay taxes after this chance of clearing their dues. The government needs to ensure that organisations avoid getting used to amnesties or delaying their payments waiting for one. That means there shouldn't be any more ways out after this, & the collection of taxes needs to be monitored. Furthermore, the government needs to figure out why an organisation or an individual would avoid paying taxes in the first place. Is it an inconvenient tax policy, a societal issue, corruption among officials, or just another case of tax evasion? All that needs to be determined & rectified to avoid these sort of problems in the future.

 

[my2cents]

Tax amnesty is excellent way to encourage people who defaulted before for some reason or other. You should treat tax payers with dignity and respect. If you put them in prison you are making him a criminal and then on top of that you are losing revenue.

 

[p(-)0ENiX]

Tax amnesty is excellent way to encourage people who defaulted before for some reason or other. You should treat tax payers with dignity and respect. If you put them in prison you are making him a criminal and then on top of that you are losing revenue.

Tax evaders do need to be punished through fines or imprisonment depending upon the individual or corporation being dealt with alongside the severity & circumstances surrounding the crime. They can't be let go simply due to a fear of a loss of tax revenue, because in that case the entire judicial system itself would suffer. However, amnesties such as the one being discussed here aren't necessarily a bad thing to get people & organisations to change their ways either. It's just that in order for these amnesties to serve their true purpose, both individuals & organisations must continue to pay taxes once the grace period is over, & the legal system must ensure that they do. All law abiding citizens should be respected, & a good method to encourage people to pay their taxes would be to educate them on the importance of tax revenue not simply for running the government, but to provide public services, build infrastructure, etc. Furthermore, governments running nations where tax evasion is an issue might want to demonstrate the benefits of paying taxes by providing visual cues to the populace regarding the various different services & projects they benefit from as a result of tax revenue.