Pakistani bill proposes ban on tax evaders from opening bank accounts, property deals or high value cars
The new bill would impose measures to prohibit the opening of bank accounts for non-compliant individuals, restrictions on their financial activities and the purchase of vehicles over 800cc, as well as the threat of sealing unregistered businesses
The Pakistani government introduced a bill on Wednesday at its National Assembly that has granted authorities sweeping power to enforce compliance with tax laws, says Dawn.
The new bill would impose measures to prohibit the opening of bank accounts for non-compliant individuals, restrictions on their financial activities and the purchase of vehicles over 800cc, as well as the threat of sealing unregistered businesses.
The Tax Laws (Amendment) Act 2024, introduced by Finance Minister Muhammad Aurangzeb, proposes amendments to a slew of tax-related laws, such as the Sales Tax Act 1990, ICT (Tax on Service) Ordinance 2001 and Income Tax Ordinance 2001.
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The proposed piece of legislation seeks to do away with the existing terms of 'filers, non-filers and late filers' by replacing them with 'eligible person' and 'ineligible person'.
While the proposed bill appears aimed at streamlining tax collection and curbing evasion, it has also raised concerns about the scope of powers granted to tax authorities and the potential impact on small businesses and individual taxpayers, including women.
The bill defines an "eligible person" as someone who has filed their most recent income tax return and declared sufficient resources in their wealth statements (in the case of an individual) or financial statements (in the case of a company or an association of persons).
For the purposes of this law, immediate family members — defined as parents, spouse, son (below the age of 25 years), daughter (unmarried, widowed or divorced) and children with disabilities — of eligible persons are also included in this definition.
Financial transactions
The bill proposes restrictions on economic transactions of ineligible persons. The manufacturers of a motor vehicle or vehicle registering authority of the excise and taxation department will not accept or process any application of an ineligible person for booking, purchase or registration of a motor vehicle.
Similarly, the FBR has restricted the registration, recording, attestation and transfer of any immovable property whose value must be notified by the FBR. The authority will not accept or process such transactions that exceed the notified value.
There may also be restrictions on authorised persons to sell securities, including debt securities or units of mutual funds, to an ineligible person.
The FBR will notify persons who will not be eligible to open a bank account or maintain an already opened current or savings bank account or investor portfolio securities account, except the Asaan account. The bank will not allow cash withdrawals from any of the bank accounts of any person exceeding the amount. The FBR will notify the limit from time to time.
Under the proposed bill, banks will be required to report high-risk individuals engaging in financial activities beyond their declared assets and turnover.
Additionally, the FBR will install point-of-sale (POS) devices in the Islamabad Capital Territory to collect sales tax on taxable services, extending the system beyond retail shops.
Penalties
The legislation seeks to grant tax commissioners the authority to seal business premises, seize assets and suspend bank accounts of businesses that fail to register for sales tax.
These measures will be lifted within two days once compliance is achieved. Appeals against such actions can be filed with the chief commissioner of FBR's Inland Revenue wing within 30 days.
The bill also proposes fines for goods sold without proper tax stamps, stickers or barcodes. For industries exploiting input tax adjustments, the FBR will employ an automated risk management system to flag questionable claims.
Exemptions
Certain exemptions are included, such as financial transactions involving the purchase of rickshaws, motorcycle rickshaws, tractors and small vehicles with engine capacities up to 800cc. The FBR will notify restrictions or limitations for the purchase of trucks and buses.
Transactions related to loans or inheritance will also be exempt from restrictions if properly disclosed in tax returns. Non-residents and public companies are also excluded.
Under the proposed bill, the FBR will not pursue concealment cases against individuals who disclose undeclared assets related to remittances or inheritance.
The bill allows tax authorities to hire auditors and experts on a contractual basis for audits, investigations, litigation and valuation purposes.
