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Un-documented transactions: property deals to be brought into tax net through NTNs

ISLAMABAD (April 19 2009): The un-documented transactions of buying and selling of property in posh areas would be brought into the tax net by issuance of National Tax Numbers (NTNs) to the potential purchasers/sellers asking them to file income tax returns under the Income Tax Ordinance 2001.

The issue of broadening the tax base was discussed threadbare during the Director Generals Conference presided by FBR Chairman Ahmed Waqar here on Saturday. Sources told Business Recorder that the tax authorities mainly emphasised on two areas of broadening the tax base and meeting the budgetary targets in the remaining months of 2008-09.

During the conference, it has been noted that many buyers and sellers of expensive property are not filing income tax returns and operating out of the tax net. The data collected from various housing societies also confirmed such kind of property transactions, where buyers and sellers are not registered and needs to be brought into the tax net. It has also been found that property has been transferred in some cases, but the capital value tax (CVT) has not been deposited in the national kitty.

Sources said that the Director General Regional Tax Office, Karachi referred to a case of property worth millions of rupees, which was detected in Karachi. The data of this transaction was confirmed from the information collected from the housing societies. It was found that the person involved in this large property transaction was not a registered taxpayer. The department has asked the person to file return and pay the due amount of tax.

Similar nature of cases would be detected in all major cities of the country to ensure filing of returns by the un-registered persons involved in expensive property transactions. On the basis of lists collected from the housing societies, it has been found that the income tax returns have not been filed by many persons involved in property transactions worth millions.

It was also discussed that the provisional assessment could be made for issuance of demand notices to such purchasers/sellers involved in property transactions worth millions of rupees by issuance of Trial Registration Numbers (TRNs).

The FBR has decided to empower the senior income tax officials to conduct assessments on the basis of TR Numbers being allocated to the compulsorily registered new taxpayers. The TR numbers would be issued to those persons, who would fail to respond to the notices of the income tax department for registration purposes. The FBR has proposed amendment in the Income Tax Rules in this regard.

According to the proposed amendment, the Commissioner having jurisdiction over a case may register a person as a taxpayer where he is satisfied that the income of the person is taxable and is required to file a return of income under section 114 of the Income Tax Ordinance 2001.

The statutory notices could be issued for assessment of income or other legal obligation of the taxpayer under the Income Tax Ordinance on TR Number, it added. If necessary, the TR numbers could be issued to the un-registered buyers and sellers of property, on a case to case basis.

Sources said that the tax authorities rejected a proposal of a Director General about going back to the old circle based system. It was argued that ownership of file has been lost in the functional based system. There is a command and control problem and enforcement issues under the new system. It was further claimed that tax officials shift responsibility from one to another under the functional based system. However, tax authorities outrightly rejected the idea with the plea of continuation of reform process at any cost. The conference also focused on recovery of arrears, revenue targets and effective monitoring of withholding taxes.

Source: Business Recorder

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