Interview with Muhammad Shafi
Malik, Regional Commissioner Income Tax
By AMANULLAH BASHAR
Sep 20 - 27, 1999
The introduction of Universal Self Assessment Scheme (USAS) and the
Development Tax , exemption of small traders from income tax for the current financial
year accompanied by drastic cut in the rates of income tax are the massive reforms in the
tax regime and the efforts for creating a tax culture in Pakistan.
These observations were made by Muhammad Shafi Malik, the Regional
Commissioner, Income Tax (Southern), in an exclusive interview with PAGE.
Shafi Malik, who assumed the charge of his office only a few days back,
said that the new simplified tax scheme has provided an ideal opportunity to the business
community to get into documented economy by filing returns under newly introduced USAS.
Every assessee has to file only a one page return form which has been designed in the
simplest way. Since the government has asked the tax collectors to keep their hands off,
there would be no question to be asked from the tax payers filing returns. All these steps
have been taken under a government policy which has greatly reposed confidence in the
business community. The government on its part would naturally expect a fair response from
the business community. He was of the view that while reciprocating to the policies of the
government, the tax payer would honestly declare the taxable income.
The Regional Commissioner expressed the hope that the tax payers would
voluntarily come forward to make it a success. "I would personally be happy if the
new scheme yields the desired results including increase in revenue and the tax base.
Currently the total number of taxpayers are estimated around 1.7 million in Pakistan, he
The government has rolled the ball in to the court of the tax payers by
introducing the best possible reforms in the tax regime. The continuation of these
schemes, however, directly linked to the positive behaviour of the tax payers. The
government may give a second thought to its policies otherwise, he felt.
Malik Shafi, however, felt that since tax rates have been drastically
cut under the new policy, it may consequently affect the overall yield, and the exact
position will however be known at the end of the year.
Although he did not mention it but he was visibly concerned about
meeting the revenue target of Rs356 billion set by the government for the current fiscal,
mainly due to what he described the drastic cut in tax rates. The Regional Commissioner
was, however, hopeful to achieve the revenue target of Rs38 billion given to the Southern
region for the current financial year.
Under the new and simplified scheme the complexities have been removed
and the acceptance of the return would mean assessment order. By introducing the new
scheme the government has met the long standing demand of the tax payers.
The scheme is optional for existing as well as new taxpayers. Those who
do not opt for this scheme may file their returns in the standard forms for assessment
under the normal law. However, their cases may not be dealt with by the same Circle
holding original jurisdiction.
CBR has already issued a single-page simplified Income Tax return form
for depositors for the assessment year 1999-2000.
The new form does not require tax payer to essentially disclose total
turnover, gross profit and net profit, and it does away with most of details which were
required to be disclosed in the two-page forms used in 1998-99.
Under the new scheme, the individuals are not required to mention their
phone numbers and zone code. It is not mandatory now to visit any office other than the
respective IT office, more than once for verification of the tax, deposited. During a
single visit to the IT office , the assessee would be able to obtain an endorsement, duly
accorded by putting a seal on the return form, which would be the final stage of the
One copy of the return of income for non-corporate tax payers
qualifying for acceptance under the scheme shall be retained by the bank, the other by the
department and the third copy would be signed and stamped by designated income tax
authority at the time of filing of return who would constitute the assessment order under
section 59)(1) of the Income Tax Ordinance 1979.
Companies shall file prescribed returns in duplicate. One copy would be
retained by the department and the other would be signed and stamped by designated income
tax authority at the time of filing of return who would constitute an assessment order.
Under Universal Self Assessment Scheme, 26 income slabs between
Rs50,000 to Rs500,000 and above have been evolved. The scheme offers a tax credit of
Rs1250 to the assesees in place of basic exemption limit of Rs40,000 permissible
previously. Those filing returns under this scheme will not have to pay 10 per cent
surcharge. More than 20 per cent of the income, declared under this scheme, would be
deducted as tax. This scheme is not applicable to non-residents, public companies, listed
with the stock exchange, banking companies, leasing companies and modarabas. Returns of
registered firms and eligible companies would qualify for acceptance under the scheme if
tax exceeds by 30 per cent as compared to tax payable on the income last declared or
assessed (whichever is higher).
The tax payers with income declared up to Rs500,000 and more who come
anywhere in the 26 slabs and will have to pay income tax at the following rates:
For the first 11 slabs, where income declared upto Rs100,000
Income declared Tax rates
1) Rs50,000 Rs1250
2) Rs55,000 Rs1750
3) Rs60,000 Rs2250
4) Rs65,000 Rs2750
5) Rs70,000 Rs3250
6) Rs75,000 Rs3750
7) Rs80,000 Rs4250
8) Rs85,000 Rs4750
9) Rs90,000 Rs5250
10) Rs95,000 Rs5750
11) Rs100,000 Rs6250
For the next 10 slabs, where income declared upto Rs200,000:
1) Rs110,000 Rs7250
2) Rs120,000 Rs8250
3) Rs130,000 Rs9250
4) Rs140,000 Rs10,250
5) Rs150,000 Rs11,250
6) Rs160,000 Rs13,250
7) Rs170,000 Rs15,250
8) Rs180,000 Rs17,250
9) Rs190,000 Rs19,250
The last 5 slabs where income declared upto Rs500,000 and above:
1) Rs250,000 Rs31,250
2) Rs300,000 Rs41,250
3) Rs350,000 Rs56,250
4) Rs400,000 Rs71,250
5) Rs500,000 and above Rs102,250
Salient features of USAS
New taxpayers can opt for the scheme if the income declared is at least
30 per cent of the investment or capital employed in business.
New tax payer means a person who has never filed a return in the past
under the Income Tax Ordinance, 1979.
Registered firms and eligible companies shall attach copies of final
accounts with the return. Adhoc, lumpsum additions to income are allowed under the scheme.
These could be incorporated in the books of accounts as tangible additions without any
further charge of tax. Pending set-aside cases will be ignored for purpose of comparison
of income. Definite amount of refund already determined by the income tax department can
be adjusted against the tax liability under the USAS at the option of the
There would be no arbitrary selection of cases for audit or scrutiny.
Cases of concealment/ evasion of income will be brought to the notice
of Regional Commissioner of income tax who may only after counselling with the tax payers
take necessary decision for poroceedings under normal law. The tax payers are at liberty
to declare their true turnover, gross profit and net profit. No adverse inference would be
drawn with regard to the quantum of declared sales and rate of gross and net profit.
PAGE believes that as a result of the new scheme, the contact between
the tax payers and the collectors has been greatly minimized. The business community has
always been making hue and cry that the complex and cumbersome tax procedure was the major
reason for corruption. The frequent contact between the tax collectors and the tax payers
due to complex procedure was also pleaded as time consuming and the major factor for
keeping the potential tax payers away from the tax net. Now that fear of going through the
cumbersome procedure and coming into contact with the tax collectors has been done away
with under the new policy. The economic managers should also support the spirit of the tax
collecting style under the new scheme. This attitude may help combating the tax evasion
culture in the country.