KARACHI: Federal Board of Revenue (FBR) has rescinded all circulars and instructions previously issued on the matter of foreign remittances exemption.
In Pakistan taxation or non-taxation of foreign remittances has historically been in the spotlight both from the tax policy and tax law enforcement perspectives — more so, since early 1970s.
In the wake of workers’ remittances starting to assume central role in the external sector management over the past few decades, in addition to Federal Board of Revenue (FBR), and State Bank of Pakistan (SBP), higher judiciary has also gained significant importance.
The multiplicity of players, their overlapping roles, and lack of systematic coordination mechanisms amongst them — have many a time, led to policy paradigms that are checkered, at best, and conflicting, at worst — with innovations in banking and trans-border money transfer modes and judicial activism confounding the confusion even further.
This conflicting conundrum between policy planks and judicial pronouncements has resulted in serious difficulties for law enforcement by IRS Formations and fallouts for taxpayers in terms of variable and uneven tax treatment meted out across the country.
FBR received representations indicating that the letter of the (tax) law, SBP regulations, and the case law developed over time, stand at opposite poles when it comes to taxation or non-taxation of foreign remittances resulting in initiation of avoidable tax proceedings, creation of unsustainable tax demand and additional burden for taxpayers.
It is, therefore, imperative that a comprehensive set of instructions — laying bare historical context, de-conflicting policies and regulations of key institutional players, and prescribing a clear-cut roadmap for uniform implementation across the board with least additional compliance cost to the taxpayers, are issued.
Moreover, all departmental appeals filed on the stricto sensu interpretation of the law are withdrawn.