FBR may propose amending concealment of income, source of remittance laws

KARACHI: The Federal Board of Revenue (FBR) may propose major amendments to laws related to concealment of income and questioning the source of foreign remittances in the upcoming budget 2017/2018, official sources said on Tuesday.

The sources said a meeting to discuss the next year’s federal budget was held in FBR headquarters, Islamabad last week to take input from tax offices before finalising the tax proposals.

Sources in Large Taxpayers Unit (LTU) Karachi said the unit had proposed changes to Section 111 and Section 111 (4) of Income Tax Ordinance, 2001 for taking action against concealed income which was discovered after five years.

Discussing the source of foreign inflows, it was suggested since the immunity from questioning was not available in any other law, the Income Tax Ordinance, 2001 should be amended.

An official of LTU Karachi said as per law the tax officials had been authorised to initiate legal proceedings against concealment such as:  any amount is credited in a person‘s books of account; a person has made any investment or is the owner of any money or valuable article; a person has incurred any expenditure; and any person has concealed income or furnished inaccurate particulars of income.

The official, however, said the tax officials had been restricted to initiate legal proceedings in those cases that were discovered within five years.

The official said LTU Karachi had proposed that the time restriction in case of identification of concealment should be withdrawn, and the law amended so a person is liable to explain the source of income in case concealment is detected any time in the past years.

The unit also proposed amendment to monitor the inflows of foreign remittances in order to avoid money laundering incidences.

Under Section 111(4) there is exemption from questioning the source of foreign exchange remitted outside Pakistan through normal banking channels, and that is encashed into rupees by banks.

The FBR meeting also discussed the Protection of Economic Reform Act, 1992, which had given blanket immunity from questioning the source of foreign remittances. As per the FBR interpretation of the amendment made to the act in 2002, the immunity was withdrawn.

The official said the FBR authorities had agreed to further deliberate on the amended law, and would propose amendment to Income Tax Ordinance, 2001 to question the source of remittance sender. The official said the meeting was unanimous that the incentive had been reportedly misused and should not continue in future.