Daily Times

Mathematics is defined as “science dealing with numbers.” When you hear your favourite song, have you ever realised what is common in numbers and music and how are numbers used to create the music you enjoy? However, every number plays an important role in our life. Almost everything we do involves numbers; be it calling your friend on mobile; getting your car filled with gas; buying fruits; using the elevator; looking at your Facebook likes; the distance you travel; the hours you sleep almost everything.

However, the most important to the businessmen is the amount of profit or loss with which they end up every month and to a salaried person, how to make both ends meet in his salary. Among the 10 most important numbers, the discovery of which have pushed the world forward and led to bridges being built, finances being accounted for and completions of other tasks throughout history, two numbers, Pi (3.14159) and the speed of light (186828 MPS) are very significant and known to everyone.

However, another number in our dear and pure Pakistan has gained significance beyond what it was intended to do. None of us ever imagined that a humble 13-digit number just to identify a person can have such a devastating and debilitating effect on the country’s economy. You guessed it right – it is our Computerised National Identity Card or CNIC for short. From July 1, every transaction of buying and selling above Rs 50,000 has to be identifiable with a person buying and evidenced by a seller in his records. If the seller fails to record the CNIC number of the buyers, he is penalised by around 15 per cent of the sale price (i.e. three per cent further sale tax and about 12 per cent of the input tax, disallowed to be adjusted), which is in addition to the 17 per cent sales tax. That makes it a total of an additional 32 per cent of the sale price, which a consumer has to pay. Since everybody has to follow the rule of law, so is nothing wrong in it; every manufacturer, service provider and trader must comply with it to complete the trail of the transaction.

But hold on. The trail must end when the trader comes into play. The trader insists that sales tax and income tax should not be collected from them. They contend: (i) They need more time to understand the law (the sales tax law is 29-years-old, and income tax law is 72-years-old and their second and third generation are doing the trading.); (ii) They don’t have enough staff to maintain the accounts (although they are opening LCs, buying and selling on credit worth billions of rupees per annum from dozens of sellers); (iii) The sales tax and income tax has already been paid by the manufacturers, so they should not be bothered to comply with the laws (meaning they should not pay sales tax on their value addition and no income tax on their profits); (iv) They should be charged income tax at 0.10 per cent of the sales, which works out at one per cent of their profit, assuming 10 per cent margin on sale or two per cent, if their margin is five per cent. One should not forget that an ordinary person making a profit of Rs 100,000 per annum is required to pay in any business about 25 per cent income tax (i.e. Rs 25,000, whereas a trader wants to pay just Rs 1,000 and that also without any supervision or check on their sales or profit.) and (v) The traders say that FBR people are corrupt (There may be truth in the statement but for every bribe-taker, there is a bribe giver who bribes to get illegal advantage; equally true is the fact of withholding decisions by the officials to induce gratification).

The basic reason for traders’ reluctance to disclose their CNIC is the fact that the quantum of their purchase and sales shall be known which shall enable the FBR to estimate their true profits

The basic reason for traders’ reluctance to disclose their CNIC is the fact that the quantum of their purchase and sales shall be known which shall enable the FBR to estimate their true profits. A trader has nothing to lose by not doing his business for four or five months; their overheads are nominal. It is the manufacturing sector which suffers the most. The action of traders has jammed the economy of the country without any let or hindrance. An article by Mr Mansoor Ahmad, titled “How ‘unschooled’ traders dodge documentation,” in another English newspaper, has very well-articulated the reasons why the traders don’t want to come into the net.

The government has made an effort to abate the implications regarding CNIC by assuring the businessmen verbally, and also in writing that no adverse action shall be taken if the CNIC number used by them is found to be unauthenticated; provided it was reported in “good faith.”

Good faith is defined as “honesty of intention.” This can be explained that if the seller has been given 100 CNICs by the buyers, and five or 10 are found to be unauthenticated, this may be considered as good faith but if 80 or 90 per cent are found to be unauthenticated, this shall be in “bad faith,” and shall be liable to be taken as non-compliance of section 23 (B) of the Sales Tax Act. One has to see whether the manufacturer shall be held responsible or the buyer!

Even if the buyer, seller and the govt close their eyes and let the misuse of CNIC put under the carpet, a sword shall still be hanging over both buyer and seller. That is Identify Theft.

The State Bank of Pakistan has issued a memorandum as “Protect yourself from Identify Theft,” which states Identity theft to be a form of fraud or cheating of another person’s identity in which someone pretends to be someone else by assuming that person’s identity, can suffer adverse consequences if he or she is held accountable for the perpetrator’s actions.

Section 14(I) of Prevention of Cyber Crimes Act 2019, which deals with unauthorised use of identity, states, “Whoever obtains, sells, possesses, transmits or uses another person’s identity information without authorisation shall be punished with imprisonment for a term which may extend to three years or with fine which may extend to five million rupees, or with both.” In addition to the persecution as stated above, the FBR shall impose a penalty not only of disallowing input tax but also under its prosecution sections, which are available to them. I wonder if any buyer or seller shall think of misusing the CNIC to comply with Section 23(b).

Further, the person whose CNIC was misused without his authorisation can sue the buyer and seller both under the Anti Money Laundering Act 2010. Section 41(2) of the Act makes offences at serial No. 11 of the Table under section 33 of the Sales Tax Act cognisable under the Anti-Money Laundering Act, which states “Any person who (a) submits a false or forged document, to any officer of the Inland Revenue (b) falsifies the records including Sales Tax Invoice (c) make false statement, false declaration; false personification gives any false information or issues or uses a document which is forged or false.” I wonder if anybody will or should dare to violate CNIC clause in the face of risking prosecution under the Sales Tax Act, Prevention of Cyber Crime Act and Anti Money Laundering Act.

SUGGESTION: FBR charges Further Sales Tax at three per cent if the goods are sold to a non-registered person which is a meagre difference to ensure legal compliance. I suggest FBR should charge Further Sale Tax at 10 per cent on sales to the unregistered buyer and remove the condition of CNIC or registration. The difference of 10 per cent in the sale price of a registered and unregistered person shall force the errant traders to either enter the net or exit the net.

The writer is a Chartered Accountant