Analysis of Amendments in Income Tax Law

By

Dr. Ikramul Haq[*]

The Central Board of Revenue (CBR) has three mottos: passion for routine, resistance for change and promotion of mediocrity. The changes made in the different tax enactments through the Finance Ordinance 2001 [hereinafter: “FO 2001”] have to be seen in this perspective. Those who were expecting revolutionary reforms/changes, as promised by the Chief Executive and Finance Minister time and again, are disappointed and disillusioned. The FO 2001 is as ordinary and useless, as were all others issued in the past, as an annual ritual by the military and the civil governments alike

The phrase “much of the same” truly applies to FO 2001, as it makes patchwork here and there and no meaningful structural changes are made in the outdated, rotten and self-contradictory tax enactments. CBR’s passion for routine has been, in fact, reflected in a more vivid manner because it even did not heed to most of the amendments of procedural nature sought by the trade bodies and the Tax Bars. The FO 2001 is a best reflection of babu (clerical) mentality of the CBR stalwarts (sic), who cannot think beyond the status quo, as the obscure and complicated nature of the prevalent tax system is their main weapon to harass the public.

Following is a review/analysis of only those changes in Income Tax Ordinance, 1979 [hereinafter: “the Ordinance”] that are of substantial nature. I have intentionally left out those which are either procedural or insignificant.

 

1.        Section 2(20)(b), 2(24)(d), 12(9) and 50(6A)—Taxation of bonus shares as dividend in the hands of shareholders.

1.1       Amendment is made in sub-clause (b) of the clause (20) of section 2 to the effect that any distribution by a company by way of bonus or bonus shares to shareholders should be construed as “dividend”. The term shareholder includes preference shareholder as per section 2(42) of the Income Tax Ordinance, 1979. It means that both the categories are amply covered as far as the application of this sub-clause is concerned. 

1.2       The taxation of bonus shares in the hands of shareholders as dividend is a major shift from the historical position where such distribution was considered, through legal fiction, income of the company and not that of the shareholder. The reversal of position means that most of the companies, except those covered in section 12(9A), will not distribute anything in terms of cash, although they may have huge distributable profits On the contrary, the shareholders will be penalised even if they do not get anything but mere papers.

1.3       Definition of the word income in section 2(24) now includes in the case of shareholders of a domestic company [defined in section 2(21)] the amount representing the face value of any bonus shares or the amount of any bonus declared, issued or paid up by the company to its shareholders with a view to increasing its paid-up share capital. The restriction of income quantification to face value of bonus shares is against the decision of the honourable apex court in 66 Tax 6(S.C.Pak) overruling the judgements of the Lahore High Court in 28 Tax 159 and 33 Tax 227. In case of bonus shares, the benefit in the hands of the shareholders should be worked out by spreading the cost of old shares over the older shares plus the bonus shares taken together if these rank pari passu. One wonders how the CBR stalwarts overlooked this binding precedent by the apex court. It will be unjust to take face value in certain cases where the realizable value is much lower for e.g. if a person gets stock shares in the form of bonus shares of face value of Rs.10 each whereas the net realizable value in the market is Rs.3 (as is in the case of majority of the Modarabas at the moment) why should he be penalised to pay tax on Rs.10 for each bonus share received by him where its actual price is Rs.3 only.

1.4       The amendment in section 50(6A) requiring the company to collect tax at the time of issuance of bonus shares is strange. It means that the company will have to pay this tax out of its own pocket as in issuance of bonus share no cash distribution is involved from which the company can withhold 10% tax, which is full and final discharge of shareholder’s liability u/s 80B. Has the burden of taxation been really shifted from the company to the shareholder? This amendment in sub-section (6A) of section 50 has once again proved that legal drafting is CBR’s waterloo.  It also shows the level of understanding of law in the minds of the CBR’s stalwarts (sic).

2.        Section 13(2A)—Immunity to inward foreign exchange remitted through normal banking channels and enchased in Pak rupees from scheduled banks.

2.1       This amendment is aimed at eliminating hawala/hudi business. These illegal/informal ways of transfer of foreign exchange has destroyed our foreign remittances through normal banking channels and also the tax system. The State is in dire need of foreign exchange, and this facility as a means for whitening of black money, if properly publicised, will yield good results for tax collection and building up of foreign exchange reserves. 

2.2       The amendment has, however, a lacuna that it has only mentioned encashment of foreign exchange from a scheduled bank, remitted into Pakistan through normal banking channel, for availing the immunity from section 13, whereas it should have been from all the authorised foreign exchange dealers, if the purpose is surrendering of foreign exchange at the official rate to the State and not giving benefit to any particular commercial bank. If scheduled banks are not supposed to surrender this foreign exchange to the State, then the object of the amendments is meaningless.

3.        Section 41A—Allowance for investments in shares.

3.1       This is an important amendment giving impetus to the capital markets and industrial investment. The assessee, other than a company, will get tax allowance of 10% of his income or Rs. 1,00,000, whichever is less, in purchase of new shares offered by public companies listed on a Stock Exchange in Pakistan, being original allottee or purchaser of such shares from the Privatisation Commission. The allowance will be retrieved back if he sells such shares with 12 months of their purchase.

4.       Section 44AA—Retirement Annuity Scheme

4.1       An individual being resident of Pakistan (employee or engaged in self-employed business or profession chargeable to tax) who is not having a pensionable job or retirement benefits will be entitled to an allowance of any amount paid by him after 1 July 2001 by way of premium or contribution under a contract of annuity scheme approved by Security and Exchange Commission (SECP) duly registered under the Insurance Ordinance of 2000.

4.2       This is no doubt a highly appreciable amendment brought through FO 2001.  Any individual either salaried or having business income, who is chargeable to tax will be entitled to an allowance of 5% (with a maximum ceiling of Rs50,000) being contribution or premium paid under a contract of annuity scheme to an insurance company (approved by SECP). In UK’s Income & Corporation Tax Act, 1988 such a scheme known as Personal Pension Scheme as an alternate to Occupational Pension Scheme was introduced 12 years back. Since the scheme was basically age related, the UK Legislators provided the brackets as follows:

AGE           Maximum %age

Up to 35          17.5

36-45               20

46-50               25

51-55               30

56-60               35

61 or more       40

The CBR has announced a single percentage of 5% for all age groups, which is against the spirit of the scheme. The maximum ceiling/earning cap in UK is GBP 91,800 (equivalent to PKR 8,262,000 approx), whereas the CBR has fixed it at Rs. 50,000.00, which is certainly too low. In the UK, the contribution is allowed as straight deduction from the total income, while the CBR stalwarts have restricted it on average rate of tax. These three drawbacks have neutralized the entire benefit of the scheme. It shows the babu mentality of the CBR wizards that although they copy good things from abroad, but always destroy it through their narrow-mindedness. In UK this scheme has many other features such as carry forward / carry back / unused allowance, but no such provision has been provided by the CBR. If such changes and amendments are not made, it will be rightly presumed that the CBR, in fact, has made this amendment for the benefit of insurance companies and not for the benefit of individuals.

5.       Section 50(5AA),(5B),(7),(7A) and (7G)—Omission of certain withholding provisions

5.1    The Finance Minister has created a wrong impression that five types of presumptive incomes have been eliminated. The fact is that out of the five omitted sub-sections of section 50 of the Ordinance, two were redundant and three represented non-presumptive withholding provisions. This has not been done to give any relief to the taxpayer or to change the distorted character of the Ordinance, but the reason was that under these provisions the collection was too meagre. The fact that it has been used as a ploy by the CBR stalwarts (sic) to convince the finance minister that they are ready for reforms is the worst kind of tactics one can expect from such high level officers.

5.2       The CBR people also hoodwinked the finance minister as he was made to believe that five types of presumptive-oriented withholding provisions were going to be withdrawn. The nature of most of these withholding provisions was that of advance tax adjustable against tax payable with return. The omitted sub-sections (7), (7A) and (7G) of section 50 were not covered under the presumptive tax regime. As regards the remaining two, namely sub-sections (5AAA) and (5B), these were redundant due to change in law. The CBR and the finance minister owe an apology to the nation for this blatant lie that they abolished some provisions relating to presumptive tax regimes. The fact is that the presumptive tax regime remains intact in full force.

5.3       The most painful aspect of our tax system is its inequality.  The burden of tax is less on the rich and more on the poor.  On the one hand all the progressive taxes like gift tax, estate duty, capital gain on immovable property and wealth tax have been abolished and on the other in the name of documentation of economy (sic) the State is resorting to regressive taxation like presumptive taxes in income tax and multiple-point General Sales Tax (GST). In FO 2001 not a single presumptive tax provision has been eliminated, as was wrongly claimed by the Finance Minister in his budget speech.

 6.      Section 59—Self-Assessment Scheme for Assessment year 2001-2002

6.1      Mr. Shaukat Aziz in his budget speech strongly highlighted that the Self Assessment Scheme would be a primary mode of reducing assessee-collector contact. However, he did not elaborate how this mode of assessment alone can reduce (not to talk of eliminate) the contact between the subjects and the [tax] masters. The Self Assessment Scheme is not a new thing in the Income Tax Ordinance, 1979. It was even available under the repealed Act of 1922 since early 1970s. In the past, it has not helped the taxpayers to get them relieved from the clutches of corrupt tax collectors. There is nothing in this scheme this year that gives even a slightest hint for betterment or relations between the taxpayers and the State.

6.2       The much eulogized Self Assessment Scheme has the following inherent control mechanisms to ensure the leverage available to the tax collectors to harass and intimidate the helpless lot (those who have neither capacity nor resources to go for muk muka):

• Excessive documentation with the return giving innumerable opportunities to the assessing officers to fish around and catch from whichever angle they want, the ignorant tax payers who are always at the mercy of ruthless practitioners (sic) who deliberately leave lacunae here and there to later on join hands with the collectors for blackmailing their own clients.
• Insistence on cash memo for every transaction, knowing very well that hardly the Income Tax or Sales Tax Department ever managed to implement provisions relating to mandatory issuance of cash memos. If the State cannot enforce its own made laws, how can they expect the taxpayers to get cash memos? Why should the corporate sector be penalized for the policies of appeasement of the State towards the mighty traders and shopkeepers?

• Unqualified and undefined powers to select whatever returns the tax collectors want for total audit (which is not audit but a tool to tell the subject that he should behave and never ever imagine that he has any right for self clearance).

• Self-assumed interpretation of the term “concealment” that can be used against any tax payer to take him out of the Self Assessment Scheme and force him to make “contact” with the high and mighty and never think of keeping his distance as promised by the finance minister and chairman of the tax reform committee.

6.3       The tax bureaucrats have once again proved their supremacy by hoodwinking the “alien” finance minister that they are proposing something for the benefit of the taxpayers, whereas the reality is just the opposite. The Self Assessment Scheme is once again luring the people to file false declarations to avail its benefit. By doing so the taxpayers will leave many traces behind of their under-assessed incomes and for years to come they will be blackmailed perpetually by the tax collectors to strike deals with them.

6.4       The conditions to avail the scheme have been made lucrative: Public companies just have to pay the same tax as was assessed last year, private companies more than 10% of last declared or assessed, whichever is higher, and others to show 20% increase, no matter whether one has loss or higher incomes. This is a patently wrong policy decision. Time and again it has been stressed that without such pre-conditions, the assessees should be encouraged to file their true declarations and the tax collectors should have a right to verify the same independently. What is the purpose of documentation if one can get away by just paying 20% more?

6.5       It is an established fact that policy of appeasement towards mighty and greedy traders giving them facility to avail Self Assessment Schemes by showing some prefixed level of incomes has distorted and destroyed the entire tax system. It has promoted a close cooperation between the corrupt tax collectors and tax evaders. They have been depriving the State with tax worth billions of rupees. Once again under the mighty military rule such a policy of falsehood has been announced with pride and as a self-acclaimed righteous step. The State is caught in a dilemma; on the one hand it wants to ensure more tax than last year and on the other it claims that people are free to file correct declarations of their incomes. How one can keep on declaring 20% more tax when the economy is in recession. The assessee has been left with no choice but to take support of falsehood. If he fails to file return under the Self Assessment Scheme, then the entire tax machinery is there to grill and teach him a lesson of his lifetime.

6.6       The Self-Assessment Scheme is a double-edged sword in the hands of tax babus, who know how to use it against the foes and for the benefit of the “friends”. Our polite but ignorant finance minister does not have the ability to comprehend this modus operandi of CBR stalwarts.

6.7       The contacts between the honest taxpayers and the tax collectors cannot be eliminated unless a healthy tax culture is promoted where true declarations are respected and accepted. The ground realities are that those who pay their taxes honestly are always penalized. No matter how strong and reliable evidence they produce, their version is disbelieved and discarded. On the other hand, those who do not file any tax declaration, understate their colossal income or merely fulfill the pre-determined threshold of the Self Assessment Schemes fixed by their friends in the CBR are considered as “honest tax payers” and they have no complaints regarding “contacts” or excessive powers enjoyed by the tax collectors. Their cases are seldom selected for total audit, and even if these are selected (for eyewash), their declared versions are accepted after nominal additions.

6.8       The scheme, as in the past, has put the taxpayer on a tentarhook, in view of the points elaborated as under:

• As per paragraph 1.2(vi), income last assessed means the income for any year assessed immediately before the date of filing of return by a taxpayer. It is a rather harsh condition. In cases where muk muka (deal) was not made, the officers made obnoxiously high assessments. The CBR wants such affectees of its DCIT’s highhandedness not to take benefit of this scheme. It is adding insult to injury.
• As per Para 2D(i), evidence for payment is to be submitted, even for collection charges claimed if any. The CBR’s wizards must realize that in Pakistan neither the commercial buses nor taxi drivers give a cash memo to the passenger, not even a rickshaw driver. How they can   insist for such evidence is beyond comprehension!

• CBR has ostensibly shown much respect for the higher courts, which is apparent from Para 8(c), for reasons beyond their control within the meaning of the ratio enunciated in [(1991) 64 TAX 86 (S.C.Pak.)], the DCIT may further extend the period by another 15 days. What benevolence that graciously the DCIT can give you 15 days! If a person is outside Pakistan and has some genuine difficulty in obtaining information/evidence, why time relaxation should not be left at the discretion of the DCIT after examining the peculiar facts of each and every case? This shows that the CBR has no faith even in its subordinates that they can exercise their judicial discretion in a judicious manner!

• CBR wants to have full control over the selection of cases without any check and balance. Para 9(a)(i) says that computer ballot may be random or parametric. The CBR stalwarts are not ready to tell the taxpayer about their parameters; of course the word “transparency” is not in the dictionary of the CBR. Even the Honourable Federal Tax Ombudsman cannot stop them from highhandedness and arbitrariness.

• The Government wants to revive the ailing economy, but the CBR wizards require every individual to pay 20% additional tax if he wants to qualify under its benevolent scheme (my foot). But even though one pays the same (no matter if he sustained loss or has much lower income), he is still at the (parametric!) mercy of the CBR as he is not immune from total audit.

• There is a genuine apprehension that the CBR will take revenge from those who did not ‘cooperate” with them in the national survey through this masterminded scheme.

7.       Section 56—“Any year” curtailed to 5 years

7.1       Section 56 was amended last year by way of insertion of an Explanation which said that “for the removal of doubt it is declared that notice under this section may be issued in respect of any assessment year including the current assessment year and any preceding assessment year”.  This amendment by way of Explanation under the established rules of interpretation was construed to have a retrospective effect. 

7.2       Last year’s unwise and harsh amendment was to defeat the interpretation by the learned ITAT that notice u/s 56 could not be issued for earlier years. The unwise and harsh amendment, it was pointed out by this writer, would increase the discretionary and bargaining powers of the tax officials. They started blackmailing the citizens by calling returns for the last twenty years and more. Thank God that the CBR stalwarts have accepted my point of view and curtailed the time limitation to 5 years as is the case u/s 65 of the Ordinance.

8.       Section 58 – Revision of wealth statement

8.1       Every assessee declaring income of Rs. 200,000/- or more will have to file a Wealth Statement with the return. This was done last year in view of the fact that Wealth Tax Act, 1963 became inoperative with effect from assessment year 2001-2002. This amendment gives legal cover for filing of a revised wealth statement if one discovers any omission or mistake.

9.       Section 59(4)– Time limitation for SAS cases

9.1       Original position of section 59(4) that no order shall be made in the case of returns filed under self assessment scheme after 30^th day of June of the assessment year next following the income year for which the return has been filed has been restored. Last year it was extended to 2 years.

10.     Section 62C— Omission of avoiding repetitive appeals

10.1     Last year this new section was inserted aiming at eliminating repetitive appeals on the same question of law. It provided that the DCIT will follow the orders of High Court or of ITAT on an identical question of law in all the cases pending before him notwithstanding the pendency of Department’s appeal against the said order provided that: –

a.         The assessee makes an application that it will not file any appeal if the decision is reversed or modified by the High Court or Supreme Court.

b.         The DCIT will modify the order, notwithstanding any limitation period provided in the Ordinance, within a period of 6 months from the date of receiving of such decision by the court.

10.2     It is strange that the CBR has omitted this section without any plausible reason. It was in the benefit of the taxpayers to avoid unnecessary appeals on similar questions of law. It appears that the CBR loves multiplicity of appeals and have utter disrespect for the orders of the ITAT and the High Courts. It is no doubt a regrettable step on the part of CBR.  It once again confirms that neither the Parliament (which is now dissolved) nor the military regime has any say in fiscal laws.  In fact, the CBR’s high ups keep on playing with the fiscal laws according to their own wishes and whims. Perhaps they do not want to let go of appeal fee and 15% of tax assessed to account for the next budgetary target.

11.     Section 80D—Exclusion of individuals, AOP, URF & HUF

11.1     The scope of section 80D was enlarged last year to cover the cases qualifying for self-assessment scheme. Every person had to pay minimum tax of 0.5% on declared turnover. Mercifully, this highly unjust amendment has now been restored  to pre-2000 position. 

12.     Section 138—Withdrawal of Revision powers

12.1     The post of Member (Judicial) was abolished last year for reasons best known to the CBR.  The revisionary powers u/s 138 against the order of the first appellate authorities were vested in him, which were transferred to the Regional Commissioners.

12.2     This section has been again amended to provide that no revision will lie after 30^th June 2001. This is sheer ad-hocism.  The CBR has been making amendments in this section without any rational basis. It has destroyed the entire scheme of appeal and revision by such erratic amendments, which has no justification whatsoever.

12.3     From the standpoint of taxpayers, it was a convenient forum to avoid inordinate delay in seeking legal remedies under the established appellate system.  Appointment of Tax Ombudsman is not a substitution for revision, which is a judicial function under the law.  Tax Ombudsman is not supposed to hear revision petitions, as his main function is that of a watchdog.  It is lamentable that such a useful revision forum has been abolished without proper thinking.  It appears that experimentation is the keyword for the policymakers. 

13.     Para A, First Schedule—Reduction in Tax rates

13.1   The painful reality is that the finance minister in his budget speech created some wrong impressions about the dates from which the reduction in tax rates has been given, perhaps he was misinformed by the CBR high-up. He proudly announced that the basic exemption for taxable income has been raised to Rs. 60,000.All the newspapers carried out this good news in bold headlines, without informing the public at large that the rates would be effective from assessment year 2002-2003. Of course, this is not their fault, as the finance minister did not clarify it. The special correspondents of newspapers specialising in finance had neither time to read the FO 2001 nor the expertise to discern the date of effectiveness of different provisions of law.

13.2     The government has been making tall claims about simplifying tax laws whereas the ground reality is that even the finance minister could not tell the people that the CBR presented future relief(s) portraying as if it is available from this year. The reduction in tax rates would be available for assessment year 2002-2003. One wonders what was the need to pose as if it would be available for the assessment year 2001-2002, and what is the guarantee that it will be maintained when FO 2002 is announced. This is a bizarre situation reflective of the level of decadence in the thinking of our rulers.

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14      Overview of tax policy

14.1    The Finance Ordinance, 2001 does not contain any measure or step for basic structural changes in the tax system. The deferment of tax reforms in tax administration and policy is indicative of the fact that yet another “brilliant” finance minister has been over empowered by the CBR’s babus. They managed to convince our polite and humble finance minister to restrict his tax agenda to a few cosmetic changes making the budget glitter from outside but not make an attempt for any meaningful changes to weaken their control over the subjects (poor tax payers having no rights but only obligations, that too without any quid pro quo).

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1. It is disturbing to note that the government has deferred all the tax reform measures suggested by the Task Force headed by Mr. Shahid Hussain, wherein some specific and concrete steps to reduce assessee-collector contact and corruption rampant in the department were recommended. On the contrary the military junta has once again relied on the tax bureaucrats (sic) sitting in the CBR for a patchwork of figures and numbers here and there. It is unfortunate that the Budget 2001-2002 has proved to be yet another “Babu Budget” showing a typical clerical mentality of changing rates of duties and taxes alone.

14.3     The present situation of antagonism between the CBR and taxpayers needs to be reconciled through a process of national consensus. A National Tax Commission, comprising judges, professionals, and representatives of the taxpayers and tax machinery, is the need of the hour. The task of tax reform cannot be achieved through handpicked experts (mostly coming from Washington) and some local teachers (who even do not know the ABC of taxation). The decision to reform tax system and laws through CBR’s backed tax reform committees, in which assignments have been given to ex-bureaucrats (who are in fact responsible for the present state of affairs), is an ugly joke with the nation. The tension prevailing between the government and taxpayers can only be eased through a national reconciliation process and not by issuing threatening statements by CBR stalwarts (sic). The proposed National Tax Commission as a truly representative and competent forum can provide a basis for an equitable tax system in Pakistan in the near future.

14.4     The process of national reconciliation on tax matters will certainly require some time. Meanwhile, the Government in order to restore the confidence of the taxpayers should immediately promulgate Taxpayers’ Bill of Rights in the form of a Presidential Ordinance. The provisions of the Bill must: –

(a)        safeguard and strengthen the rights of taxpayers.

(b)        ensure equality of treatment.

(c)        guarantee  privacy and confidentiality of their declaration.

(d)       provide right to assistance by State in tax matters.

(e)        guarantee unfettered right of appeal through an independent tax appellate system.

(f)        provide facilities for independent review of disputes with tax authorities.

14.5     In recent years both the United States and the United Kingdom specifically enacted and implemented such laws to further strengthen their already highly developed tax cultures. The US Technical and Miscellaneous Revenue Act of 1998 contained a Taxpayer Bill of Rights. The UK Inland Revenue issued in 1996 a Taxpayer’s Charter informing taxpayers of their rights in audit and the tax collection processes.

14.6     In Pakistan, the State never bothered to educate the taxpayers about their obligations. They have been left at the mercy of the ruthless tax officials. The taxpayers have no specific Bill or Charter of Rights. Tax reform efforts will remain a cliché unless the State takes some fundamental steps to restore the confidence of the public in general and the taxpayers in particular and also convince them by concrete action that their taxes are spent for the progress and welfare of the society.

14.7     The taxpayers are the most humiliated beings in Pakistan, although it is a fact that a very few pay their taxes honestly, but even they have no protection of life and property. Others say that a government, which is incapable of protecting life and property of its citizens, has no right to impose or collect taxes. Those who are not paying or paying negligibly with the connivance of corrupt tax officials command respect, win elections and rule the country. After every other year, the rulers announce a tax amnesty scheme to prove that the honest taxpayers are just “idiots”. The forces of loot are hand in hand with the corrupt and both are flourishing in Pakistan. On the other hand, in the name of “documentation of economy” (sic), the life of the ordinary people is becoming difficult with each passing day. In the eye of rulers, the only purpose of National Survey for Documentation is to extort more taxes from the people. This tax is ultimately spent on giving unnecessary perquisites to the rulers of the day.

14.8     The existing tax system itself is a worst expression of colonial heritage. It is highly unjust. It protects the establishment and exploitative elements that have monopoly over economic resources. There is no political will to tax the privileged classes. The common man is paying an exorbitant sales tax (15% to 16.5%) on commodities he uses as a consumer, but the mighty generals and bureaucrats are paying no wealth tax on their colossal assets. Do our rulers know about the canons of taxation?

14.9     Adam Smith in his 1776 Wealth of Nations propounded the following four principles of taxation (commonly known as canons of taxations):

—        EQUITY: The tax payable should accord with ability to pay or taxable capacity.

[In Pakistan the poor are taxed although they have no ability to pay and the rich enjoy exemption notwithstanding taxable capacity. Recently the Government abolished wealth tax to safeguard the vested interest i.e. people enjoying assets as a result of loot, tax evasion, political bribes and gallantry awards.]

—        CERTAINTY: The taxpayer should know exactly what is being taxed, how much he has to pay and when he has to pay it, meaning that the law should be clear and unambiguous and the tax authorities’ interpretation of it should be readily available.

[In Pakistan, there is no certainty about taxes. The administrative authorities keep on playing havoc with tax laws through the infamous SRO system. Taxpayers have been left to the amazing wilderness of confused laws that are vulnerable to varied interpretation and authorities’ explanations add further confusion].

—        CONVENIENCE: The tax should be payable in a manner and at a time convenient to the taxpayer.

[CBR makes it a point to make the life miserable for the taxpayers. The procedures for collection of taxes are cumbersome and most inconvenient in Pakistan].

—        ECONOMY: Enforcement and collection costs should be reasonably proportionate to the receipts.

[Quite the opposite is the situation in Pakistan. The CBR has reduced its cost of collection by shifting a substantial part of it to the withholding agents / businessmen and that too without giving any compensation. On the contrary they receive nasty letters and punitive orders under section 52/86 of the Ordinance. In all the civilised societies, tax authorities allow percentage deduction to withholding agents/businessmen to compensate for the cost of complying with collection of taxes as an agent.]

14.10   There are flagrant and perpetual violations of established principles of taxation by the State, yet the people of Pakistan, who are the most heavily taxed in Asia, are being threatened every day by the tax authorities of dire consequences. It is high time that the Government should show a conciliatory gesture by promulgating the Taxpayers’ Bill of Rights. The economic survival of the country now lies in paying taxes. All the citizens of Pakistan who are liable to pay taxes should perform their national duty honestly and without any hesitation. The State must ensure them full protection of their rights, transparency in utilization of taxpayers’ money and implementation of a just, equitable and fair tax system.

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[*] Dr. Ikramul Haq, a leading international tax counsel, is a well-known author specialising in international tax, press, intellectual property, corporate and constitutional law. Dr. Ikram is Chief Partner of Lahore Law Associates (tel: 92 42 7313101;fax: 92 42 7226953, e-mail: irm@brain.net.pk; website: http://www.paktax.com.pk). He is a member of the visiting faculty of the Institute of Direct Taxes (LITE) in Lahore.. He studied literature, journalism and law, for his Masters and Doctorate degrees. He has written many books on various aspects of Pakistani law and global narcotics trade, some of which are co-authored with his wife, Mrs. Huzaima Bukhari.