FBR seeks powers in Finance Bill to prevent tax evasions
The FBR has proposed powers through Finance Bill 2016-17 for entering into treaty with bilateral or multilateral forums for exchange of information to ensure prevention of tax evasions in the aftermath of Panama Leaks disclosure that many Pakistani influential owned offshore companies abroad.
In totality, the FBR took tax measures of Rs180 billion through withdrawal of tax exemptions and enhancing tax rates especially for non filers but they also provided relief to the tune of Rs32 billion so the net addition into taxes stands at Rs148 billion in the budget 2016-17.
The Chairman FBR Nisar Khan also confirmed during the post budget press conference that the FBR would fetch Rs80 to 90 billion through withdrawal of tax exemption as in last two fiscal years the Board abolished Rs104 billion in first year, Rs120 billion in second year and now Rs80 to 90 billion for budget 2016-17.
For transfer of pricing, the FBR has also bound taxpayers who entered into a transaction with its associate, shall furnish within thirty days the documents and information to be kept and maintained under sub-section (3) if required by the Commissioner in the course of any proceedings under this Ordinance.
It is relevant to mention here that under guise of transfer pricing the country used to face losses without keeping proper records. Finance Minister Ishaq Dar in his initial days of working as Chartered Accountant had worked with Libya’a Auditor General in 1976 and unearthed that the oil companies were allegedly misusing price transfer mechanism because Libya was silent over it. Dar had argued that time that the oil companies should follow best international practices and finally prevailed upon all stakeholders for generating revenues to the tune of $4.2 billion for Libya at that time.
Keeping in view this experience, now the FBR proposed maintaining records in order to stop misuse of transfer pricing mechanism.
In case of exchange of information related clause, if the Parliament approves this amendment, it will enable the tax authorities to sign treaty at bilateral level with different known tax havens or OCED forum to combat rising phenomena of un-taxed money invested in offshore companies by influential of different parts of the world into tax havens as disclosed by recent PanamaLeaks.
Through Finance Bill 2016-17, the FBR seeks to substitute sub section (1) of Section 107 to provide for more instruments and arrangements of international taxation and avoidance of double taxation agreements and to make technical corrections.
In section 107—(a) for sub-section (1), the following shall be substituted, namely:- “(1) The Federal Government may enter into a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement or similar agreement or mechanism for the avoidance of double taxation or for the exchange of information for the prevention of fiscal evasion or avoidance of taxes including automatic exchange of information with respect to taxes on income imposed under this Ordinance or any other law for the time being in force and under the corresponding laws in force in that country and may, by notification in the official Gazette.
