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Senate Panel on Tax Law Provisions

Last Thursday 18th November 2021, a Senate Finance Committee meeting examined tax law difficulties and the most needed provisions. The vast majority of the Tax Laws (Third Amendment) Ordinance, 2021, was enacted. The problems of the FBR’s tax rules were discussed, and then crucial judgments were made on its behalf. Continue reading to find out what changes were made to the tax laws.

NADRA will Share the Data with FBR

The suggestion that the Nadra exchange data with the FBR for widening the tax base, indicative computing income, and identifying potential tax evasion was approved by the Senate Standing Committee on Finance in Islamabad on Thursday.

The NADRA-related clauses in the Tax Laws (Third Amendment) Ordinance, 2021, according to the FBR Member Inland Revenue (Policy), have nothing to do with the National Accountability Bureau (NAB). The Tax Laws (Third Amendment) Ordinance, 2021 does not grant NAB access to taxpayer data. He also stated that an agreement between the FBR and NADRA for data exchange to extend the tax base is underway.

Rejected Corporate Sector to Switch to Digital Mode

The Senate Standing Committee on Finance flatly dismissed most of the provisions of the Tax Laws (Third Amendment) Ordinance, 2021, including the mandatory requirement for the corporate sector to switch to digital payments by December 1, 2021.

Senator Saleem Mandviwalla briefed the committee that the whole business in Karachi is conducted through cheques. The adoption of digital payment methods would emerge as the most pressing issue for the entire business and trade community. He further stated that the FBR has presumed that Pakistan is digitally capable. These are also assumptions, and digital payment methods cannot be introduced in the country.

Moreover, Senator Talha Mehmood, chairman of the committee, unanimously rejected the FBR’s proposal for the business sector to transition to digital payments.

Withholding Agents cannot operate on Online Marketplace

While considering the Tax Laws (Third Amendment) Ordinance, 2021 at Parliament House on Thursday, the finance committee also rejected an enabling clause that would have allowed an online marketplace facilitator to act as a withholding agent under the Eleventh Schedule to the Sales Tax Act, 1990.

The committee strongly rejected the FBR Member Inland Revenue (Policy) that the online marketplace is used for the supply of goods in order to charge sales tax. In the opinion of FBR members, the online marketplace is the supply of goods, which is taxable.

Rejected All the Penalties (Gas, Electricity, Mobile Disconnection)

The committee also denied the FBR’s rights to disable mobile phones or SIM cards, disconnect electricity connections, and disconnect gas connections of people who are not on the Active Taxpayer List (ATL) but should file returns.

The committee rejected the proposal to collect additional advance tax at the rates established in Division IV of Part-IV of the First Schedule from professionals who do not appear on ATL and work from residential premises with domestic electric connections from electricity distribution providers. Accountants, lawyers, doctors, dentists, health experts, engineers, architects, IT professionals, tutors, trainers, and other service providers were among the professions.

Proposal Approved for Providing Legal Protection to Foreign Remittances

The committee also approved a proposal to provide legal protection for foreign remittances made through Money Service Bureaus (MCBs), Exchange Companies (ECs), and Money Transfer Operators (MTOs), which would be treated as foreign exchange remitted from outside Pakistan via traditional banking channels.

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