Simplification and uniformity should be ensured


Nov 29 - Dec 05, 2004





There is an immediate need of simplifying the income tax laws in our country so that citizens and especially businessmen could pay their entire attention to their respective trade for the development of economy. The situation of complication in income tax laws in the country could be realized that thousands of businessmen have gone into the litigation with the government and their cases are pending. An indicator of complication could be gauged through the number of income tax lawyers, which are above 2,000 in only Karachi city including some 1400 registered with the Karachi Income Tax Bar Association.

However, according to the Central Board of Revenue (CBR) every government in power always claimed that income tax laws were simple but they were still planning to organize national and international conferences on various subjects including on e-commerce and taxation and would also solicit tax experts in formulating laws relating to e-commerce and taxation.

In civilized societies proposed amendments in the tax laws are made public at least six months before promulgation so that they could be debated in the general public and by the legislators. On the contrary, tax administration in our country comes up with a large number of amendments in the form of a Finance Bill every year, giving no time to taxpayers to plan their tax matters, said Dr. Ikramul Haq, a tax expert and author of several books on tax and revenues.

Legitimate reduction of tax dues, should be part of tax education as is the case in all civilized societies where tax administrations post their proposed amendments on websites at least six months before their promulgation giving a chance to taxpayers to plan their tax matters.



In our country, the CBR clarifies retrospectively and prospectively of amendments after adoption of Finance Act which is an unprecedented transgression of powers by an executive authority. Every year taxpayers have an avalanche of amendments in the form of a Finance Bill. For the common man it is impossible to comprehend such frequent changes in the tax statutes. Simplification of tax laws means plugging of the loopholes in the legislation rather than experimenting unnecessarily with new but worthless ideas every year. Ambiguity in the enactment brings uncertainties and increases litigation, therefore, uniformity of laws should be ensured, he suggested.

Income Tax Ordinance 2001, was promulgated with tall claims of bringing a simple document but it has turned out to be a more complex one vulnerable to increased litigation.

Income Tax Bar Association has held an international seminar last week in Karachi in which some 50 foreign tax lawyers participated. They belonged to South Asia and exchanged the tax rules of their respective countries. This was the first time that Pakistan was the host country of this seminar. Pakistani lawyers have taken some important procedures of other countries including neighboring countries like India and Bangladesh. However, tax payers say that it would be ridiculous to expect economic growth without simplifying the laws.

The Income Tax Ordinance, 2001 which came into force on July 01, 2002 claimed to be in plain simple language and was easy to understand. The taxpayers could urged to prepare their income tax return and compute with their tax liability without any difficulty. This income tax law claimed to bring a complete change in the philosophy of income tax proceedings and it will make life easier. The salient features are: A) Henceforth, the assessing officer will not determine income and compute the tax liability. The taxpayers could declare their income and determine tax liability. B) income tax return shall be accepted without any conditions. There will be no compulsory enhancement of tax liability over previous year to qualify for acceptance. C) Income tax return filed itself will be an assessment order and the eligibility for refund will flow from their tax return. D) A certain percentage of returns filed shall be selected for tax audit on the basis of risk assessment to verify the accuracy and correctness of income tax return. E) Tax audit shall not necessarily mean an amendment of the assessment originally made by the taxpayers in their return of income. F) original assessment can only be amended on the basis of information acquired during tax audit or any other source. G) If selected for audit, there will be no pre-designated auditors to carry out audit. The officials making selection for audit will be different from those who do actual audit. In other words, the taxpayers would have no designated Income Tax Officer holding jurisdiction on tax payers. Thus universal self-assessment in its true sense will be available to all taxpayers irrespective of quantum, status, location or size. This was the first such experience in this part of the world. The new law and the universal self-assessment system was supposed to take away the discretionary powers of the tax collectors and place great responsibility and obligation on taxpayers as a taxpayer and an honourable citizen.