Home > Broadening tax base: Govt considers scrapping Rs25k, Rs40k prize bonds

Broadening tax base: Govt considers scrapping Rs25k, Rs40k prize bonds

TRC’s recomm­endati­on meant to discou­rage people from whiten­ing black money

TRC’s recommendation meant to discourage people from whitening black money. PHOTO: FILE

TRC’s recommendation meant to discourage people from whitening black money. PHOTO: FILE


As taxmen’s reluctance to implement tax reforms remains resilient, the government on Saturday considered the option of discontinuing the Rs25,000 and Rs40,000 prize bonds, mostly used by people to whiten ill-gotten money.

The recommendation of the Tax Reforms Commission (TRC) to discontinue these two denominations of prize bonds was considered by Finance Minister Ishaq Dar during a meeting, convened to implement reforms and find a solution to Federal Board of Revenue (FBR) bureaucracy’s opposition to these reforms.

However, the deadlock over the issue of notifying a Tax Reforms Implementation Committee remained, although Dar in an earlier meeting defined a mechanism to address the concerns of the FBR bureaucrats.

The FBR bureaucrats are resisting the committee’s notification on the pretext that it will undermine their authority.

Dar announced on Saturday that the date for filing income tax returns has been extended by one month to end November. This is the third extension granted owing to flaws in the information technology system and also to give more time to traders who are in negotiations with the government.

Prize bond controversy

In its interim report, the TRC has recommended that prize bonds of Rs25,000 and Rs40,000 denominations should be discontinued. It said that as per current practice the prize bonds are being used as a means of whitening money.

The practice involves purchase of the prize bonds in addition to the possession of the script wherein people tend to get the money whitened, according to TRC findings.

Sources in the FBR said that several members of the FBR are allegedly whitening ill-gotten money by buying prize bonds.

Finance Ministry officials said that Dar agreed, in principle, to the proposal but his concerns was that the retirement of the debt raised through these two types of bonds may affect his borrowings plans. Ministry of Finance and FBR officials did not have firm figures of how much borrowings were made based on the Rs25,000 and Rs40,000 prize bonds.

These prize bonds are issued by Directorate of National Saving Schemes and since the end of August, NSS total borrowings stood at Rs3.05 trillion including Rs545 billion through all types of prize bonds.

The officials said that if the financial impact of retiring this debt is limited, the recommendation may be implemented soon. The other option was to replace these borrowings with Pakistan Investment Bonds (PIBs), said the officials.

The TRC also recommended that the numbering of prize bonds should be digitised.

The withdrawal of Rs25,000 and Rs40, 000 denomination bonds is said to have a positive impact on broadening the tax base.

New Territorial Units

On an experimental basis, the government discussed the option of transforming 79 Tax Facilitation Centres into territorial units aimed at plugging the gaps that are hampering broadening the tax base, said officials.

These units will capture the non-corporate sector while the corporate sector will be dealt by the existing Large Taxpayer Units.

The government wants to give more power to heads of these units who will be responsible to deal all aspects of tax payments and audit aimed at plugging the loopholes.

The units will be established till June next year and will be a replica of circle-based system that the FBR had abandoned in the past.

Published in The Express Tribune, November 1st, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

About Amin Khan

Amin Khan is a web developer, SEO expert, Online Mentor & marketer working from last 4 years on the internet and managing several successful websites.

Leave a Reply

Your email address will not be published. Required fields are marked *