Senate body opposes attaching CNIC copy with invoices

ISLAMABAD: The Senate Standing Committee on Finance on Monday rejected the FBR’s move for disallowing invoice for input adjustmentswithout Computerised National Identity Card (CNIC) of buyers and assigned one treasury Senator Mohsin Aziz to propose recommendation to bring changes in this ‘draconian’ law.

While opposing FBR’s proposal to avoid misuse of cottage industry for registering in sales tax regime, the Senate panel recommended for jacking up turnover limit up to Rs10 million against Rs2 million proposed in the Finance Bill 2019-20.

The committee members opposed FBR’s proposal to collect 17 percent GST from manufacturers at written retail price of certain specific sectors including electronics, household appliances, paints, tyres and tubes, motorcycles etc. The Chairman of Senate panel Farooq H Naek said that the prices of these items would go up by 10 percent for customers. With the abolishing of zero rating regime for five export oriented sector including textile, the committee members feared that the prices of clothes and garments would also go up in the domestic market. On sugar price, the FBR said that the FBR jacked up tax rate from 8 to 17 percent so it would have impact of Rs3 per kg after approval of budget from July 1 but the committee members argued that the prices of sweetener had already gone up in the market.

The senators opposed the FBR move to abolish zero rating regime but decided to defer its recommendations as they would make up their minds after listening to the viewpoint of stakeholders concerned.

The senators supported the FBR move to bring millions of retailers into tax net under which the FBR slapped 17 percent GST on tier-1 retailers having shop size of 1000 square feet in post shopping malls or plazas. All these retailers of tier-1 would be linked electronically with the FBR.

The Senate Standing Committee on Finance and Revenues met under chairmanship of Senator Farooq H Naek here at the Parliament House and kick-started proceedings to finalise recommendations on the budget 2019-20. The recommendations, after getting endorsement of the Upper House of Parliament, will be forwarded to National Assembly for consideration and approval to make these changes in the budget.

On the demand of the IMF, World Bank and Asian Development Bank, the FBR proposed exemption of audit for three years if someone is selected for audit arguing that the multilateral creditors made it clear that with provision of such laws there was no need to continue parleys on the name of removing distortions into tax system.

FBR Chairman Shahbar Zaidi and Member Inland Revenue Policy Hamid Ateeq Sarwar told the committee that there were 341,000 industrial electricity connections out of which 41,000 were registered with sales tax regime. They said that the cottage industry status was being misused to evade taxes so the FBR proposed changes to avoid its misuse in the finance bill 2019-20. The turnover limit was brought down from Rs10 million to Rs2 million but the committee members did not extend support to the FBR move.

For bringing retailers into tax, the PTI Senator Mohsin Aziz said that it would be biggest move if the FBR succeeded in bringing them into tax net. He recalled that Musharraf regime had failed on this front. He said that he was not hopeful that the FBR would be able to get success for bringing retail sector into tax net. The FBR chairman said that they made moves to achieve the objective in gradual manner. The FBR proposed three different regimes for retailers as in tier-1 the FBR proposed to slap 17 percent GST. The FBR’s Member Inland Revenue Dr Hamid Ateeq Sarwar said that the FBR would provide 5 percent back scheme to customers. Secondly, he said that the FBR would hire workforce to check receipts from customers in posh areas to avoid evading of taxes by retailers. He said that the FBR would bring second tier of retailers through electricity bills and small retailers would have fixed tax regime.

The committee also strongly opposed the FBR move to make ‘trade based money laundering’ through mis-declaration of imports and exports as predicate offense with imprisonment of 10 years and confiscation of goods arguing that such law could be misused in the country.

The Senate panel also rejected the FBR proposal to grant powers to Prime Minister for appointment of Customs judges in consultation with superior judiciary instead of federal cabinet in the aftermath of judgment of the apex court.

The Senate panel also recommended to refer corruption/wrongdoing cases of FBR officers to judges of Customs court instead of other agencies/departments of the government to initiate proceedings on criminal charges against them.

“The trade based money laundering is being used to transfer funds abroad and it is very critical to bring these offenses in line with Anti Money Laundering (AML) laws to comply with Financial Action Task Force (FTAF) requirements,” Chairman FBR Shahbar Zaidi told the Senate Standing Committee on Finance here on Monday which met under the chairmanship of Senator Farooq H Naek here at the Parliament House on Monday.

It is relevant to mention here that the plenary meeting of Financial Action Task Force (FATF) is currently underway in USA from June 16 to 21, 2019 and going to take important decision about Pakistan’s compliance on FATF 27 action plan.

Pakistan has launched diplomatic efforts to win support of at least two to three countries out of total 36-member global anti money laundering and terrorist financing outfit in order to counter efforts of Indian lobby during ongoing meeting to take any decision against Islamabad. The FATF takes all decision unanimously so Islamabad has geared up efforts to foil attempts launched by New Delhi for any negative outcome against Pakistan. India has tabled resolution to downgrade Pakistan but Islamabad is expecting that New Delhi will not be able to achieve success. The FATF will issue its statement on outcome on June 21 on Friday.

However, during the Senate panel meeting, the chairman of the committee Senator Farooq H Naek said that there should be no unbridled powers at the hands of the FBR officers to charge anyone on account of money laundering. He said that in case of differences on valuation of consignment there should be some limit of differential at least over 50 percent after which the money laundering proceedings should be launched.

The Chairman FBR said that they proposed harsh punishment including imprisonment for ‘trade based money laundering’ through mis-declaration of value for illegal transfer of funds abroad.

Throwing light for introducing new section 32C in Customs Act through Finance Bill 2019, the Chairman FBR said that the ‘trade based money laundering’ is a very serious crime. “Once its established, it comes under the ambit of money laundering” he said and added that “the mis-declaration of value for illegal transfer of funds abroad has been highly abused in Pakistan. If the crime has been established, the proposed punishment is up to 10 years imprisonment besides penalty and confiscation of goods”.

If a person committed crime of trade based money laundering then separate complaint would also be filed against the accused under Anti-Money Laundering Act.

Senator Mohsin Aziz belonging to PTI said that this harsh law could be misused in Pakistan so the FBR should move ahead carefully. He said that instead of moving so fast the FBR should move ahead in gradual manner.

On PM’s power for appointment of customs judges, Naek said that the independence of judiciary must be preserved at all cost. The members were of the view that the cabinet meetings were held frequently so the powers of the government should be laid with the federal cabinet instead of Prime Minister only.