ISLAMABAD: Under the guidelines of the Finance Ministry, the Federal Board of Revenue (FBR) is making strenuous efforts to check the black economy by dint of both legislative and administrative measures.
“However, it is not possible to measure the volume of black economy and to determine whether it is increasing or decreasing in percentage terms,” sources at the FBR told Customs Today. Various measures, however, are taken to check the black economy.
The sources of investment could be probed by the income tax authorities under section 111 of the Income Tax Ordinance, 2001, they said. For the last two years, the FBR has introduced differential tax rates for filers and non-filers to encourage people to file their income tax returns on regular basis which is a major step towards documentation of economy.
Moreover, the source added that tax evasion has been declared as an offence with prescription of different penalties from Rs 25,000/- or 100% of the amount of tax shortfall (whichever was higher) applies for making false or misleading statements, inaccurate particulars of income, and concealment.
Similarly, the source added that tax evasion had been declared as an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year or both under section 191 of the Ordinance. Section 192-A, provides for prosecution for concealment of income. Such an offence will attract imprisonment up to 2 years, or five, or both.
In order to promote formal economy and to check black economy, the source observed that amendments had been introduced in section 7 of the Sales Tax Act, 1990 and section 6 of the Federal Excise Act, 2005 whereby the seller was required to furnish sales tax-cum-federal excise return by 10th of every month.
“Therefore the automated system of FBR will allow input claimed by respective buyers only in respect of those supplies which have been declared in respect of which due tax has been deposited by the seller/supplier under a newly introduced automated system of STRIVe” the source maintained.
“This step will check manipulation by persons operating in undocumented sectors of economy. System of Computerized Risk Based Evaluation of Sales Tax (CREST) is in place whereby input in respect of doubtful purchases is not allowed to the claimants under the provisions of clause (caa) of section 8 of the Sales Tax Act, 1990” the source added.
The source said that very concept of joint and several liability had been put in place under the provisions of section 8-A of the Sales Tax Act so if sales tax liability of output tax on sales had not been discharged by the seller, the same was recoverable from the purchaser who claimed input in respect of the said purchases. This provision discourages black economy as it serves as a major check on businesses carried out in undocumented sectors of economy.
“To keep a check on black and undocumented economy provisions have been made through section 21 of the Sales Tax Act to deregister, blacklist and suspend registration of a person found to have issued fake invoices or is guilty of tax fraud etc. To thwart black economy, various penal provisions are in place under section 33 of the Sales Tax Act” the source observed.
Any person unauthorized to issue a sales tax invoice specifying an amount of sales tax, is liable to penalty of Rs5000 or 3% of the amount of tax, shown in such an invoice whichever is higher” the source said adding, a person who fails to deposit amount of tax due is liable to penalty of Rs10,000 or 5% of the amount of tax involved whichever is higher”.
Similarly, the source maintained that submission of false or forged documents, destruction of falsification of record was liable to penalty of Rs25,000 or 100% of the amount of tax involved. Attempts to commit or connivance in commission of tax fraud is liable to similar penalty.
The source further added that corresponding provisions had been provided under section 19 of the Federal Excise Act to control black economy by guaranteed free access to business or manufacturing premises, office of a registered person or a person liable for registration and who might be required for any inquiry/investigation in any tax fraud committed by him or his agent or any other person.
Moreover, the source said that in case a registered person was suspected of involvement in evasion of sales tax or tax fraud, the Federal Board of Revenue and subordinate officers had the powers to post officers at the premises of registered persons to monitor production, sales and stock under the provisions of section 40-B of the Sales Tax Act. Similar provision has been made under section 45 of the Federal Excise Act.
