CVT on foreign assets, tax on ‘deemed income basis’: FBR decides to publish richest defaulters’ names

muhammadhafeezmalik · Dec 27, 2022

CVT on foreign assets, tax on ‘deemed income basis’: FBR decides to publish richest defaulters’ names

The government is weighing in on ‘naming and shaming’ the richest of the country who default on Capital Value Tax (CVT) on foreign assets and tax on deemed income basis by publishing a list by December 31, 2022.

The brainstorming into the decision’s appropriateness and effectiveness continues since the richest elite of the country appears to have been avoiding making due payments under the two heads.

The CVT on foreign assets was due by December 15, 2022, and the tax on deemed income basis by December 31, 2022.

Sources told Business Recorder on Monday that whether the government would find the courage to make public the names of the defaulters of the elite class is yet to be seen.

The Federal Board of Revenue (FBR) is considering publishing the names of defaulters belonging to the elite class, who would be failed to deposit CVT on foreign assets and tax on deemed income basis on immovable properties by December 31, 2022. The idea of “naming and shaming” has been discussed at the top level of the government.

Failure to deposit CVT on foreign assets: Taxpayers/resident individuals liable to pay 12pc per default surcharge

The government is mulling disclosing the names of the rich, who are liable to pay these taxes, but do not file the required return/declaration by December 31, 2022. The idea is to disclose the names of those defaulters, whose cases were not under litigation or whose names are not mentioned in the court judgements. On the other hand, the government is also cautious that whether it would be appropriate to publicize the names of the richest taxpayers without providing them ample opportunity to explain their position under the law.

If they are tax defaulters on account of the above-mentioned taxes, the elite class should be given a legal opportunity to respond to the notices etc before “naming and shaming” them.

According to the sources, the taxation measures of around Rs250 billion are under litigation.

All these taxation measures of super tax, the CVT on foreign assets and tax on deemed income basis were imposed on the rich class. For instance, around 6,000 rich people are required to pay the CVT on foreign assets and nearly 4,000 were required to pay the super tax on high-income earners.

Presently, there is no bar on the government to collect CVT on foreign assets and tax on deemed income basis in Sindh, sources said.

On the issue of super tax, the Sindh High Court (SHC) has declared that super tax on high-earning persons will not be applicable for the Tax Year 2022, but for Tax Year 2023 and onwards. Section 4C (Super Tax on High Earning Persons) of the Income Tax Ordinance 2001 would not be applicable for the tax year 2022, but for 2023 and onwards. Thus, the FBR cannot collect this tax for the tax year 2022.

The SHC had dismissed petitions filed against imposition of tax on immovable properties on deemed income basis under section 7E of Income Tax Ordinance, 2001. However, the cases are pending in other high courts. Balochistan High Court (BHC) had issued notices to the FBR regarding the constitutionality of Section 7E (tax on deemed income) of the Income Tax Ordinance, 2001.