Many showbiz superstars accused of tax evasion -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

Many showbiz superstars accused of tax evasion

By: SOHAIL SARFRAZ

Many leading showbiz superstars are not behind in evading taxes, revealed tax profiles of actors/singers belonging to television, film and fashion industry prepared by the Federal Board of Revenue (FBR). It has been reliably learnt here on Monday that the individual tax profiles of the showbiz high profile stars reflect – they are not only evading taxes, but also not declaring their sources of income.

Superstars’ tax profiles show that the revenue receipts have been grossly under-stated and mis-declared to hide true picture from the tax authorities. Tax profiles of actors and fashion designers also showed that they have opened boutiques in Karachi and Lahore etc. These well known screen and stage performers have multiple sources of income, but they are resorting to tax evasion, badly denting the national kitty.

The tax profiles of these top notch actors further revealed that some of the stars have shown huge expenditure to get rid of income tax despite the fact that such expenditure is predominantly borne by the sponsors. It is astonishing to note that few of the well known and distinguished personalities have never bothered to file the income tax returns.

One of the most prominent and well respected female singers is also non-filer of income tax return and wealth statement, though the government has conferred “Tamgha-e-Imtiaz” on her in recognition of her unique work in the field of music however, she hesitated in declaring her actual income.

Tax profile of another Pakistani super model, actress and designer showed under-reporting of taxes. She is also very famous in airing a morning show from Dubai in the past. General public take her as a role model, but still she has been involved in concealment of taxes.

The FBR has strongly proposed the field formations to invoke powers under section 122 of the Income Tax Ordinance 2001 for amendment in income tax assessments of showbiz personalities. According to the FBR, this sprawling industry undergoes multi level/faceted transactions involving numerous individuals, business enterprises, media groups, TV channels, and production houses both in electronic and print media. To tap the true tax potential of this industry; a well thought, properly co-ordinated, and meticulously implemented plan is required which has, henceforth, been lacking.

While a comprehensive report on the taxability of multifaceted transactions taking place in the industry is separately being prepared, the current report focuses on the cases of prominent individuals engaged in the industry. Their profiles are generated with specific focus on facets such as; whether they are: on tax roll or not, filer or non-filer of tax returns, offering lawful & true declarations of their receipts/ income, and whether their declarations are being subjected to proper taxation.

Deficiencies observed have been highlighted for necessary legal action by the concerned tax authorities. Tax years 2010 and 2011 have specifically been focused but the highlighted deficiencies could be generalised for deriving inferences and scrutinising other Tax Years as well.

Tax profile of a famous TV actor of Karachi revealed that he has declared receipts of Rs 4,976,816 in the return for Tax Year 2011 and principal (business) activity is shown as “other personal service activities”. After claiming expenses at Rs 4,105,874, net income (from business) has been declared at Rs 870,942.

Apart from the abnormally high claim of expenses, the notable point in the instant case is the non-declaration of minimum tax on services receipts as per the provisions of section 153(1) (b) read with section 153(6) of the Income Tax Ordinance, 2001. Through the Finance Act 2009, provisions of section 153 of the Income Tax Ordinance 2001 were amended and tax collected from payments made on account of such services made minimum tax liability.

Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. Considering the nature of services of an artist like him, the receipts should fall under the purview of the above sections.

The exact nature of the receipts, therefore, needs to be ascertained and taxed in accordance with the relevant provisions of law, by invoking the provisions of section 177 of the Income Tax Ordinance, 2001. It is pertinent to point out that the minimum tax liability calculates to Rs 298,609 @ of the six percent of the receipts whereas the verification of the expenses claimed and resultant incrementing the income could yield further taxation.

Tax profile of the actors further revealed that the declared receipts for the Tax Year 2011 are grossly understated as compared to the receipts unearthed by this office. These are, however, the receipts which could be unearthed by this Directorate General Intelligence and Investigation Inland Revenue.

In addition to the under-declaration of services receipts, no property income is declared. The FBR has proposed legal action under section 122 of the Income Tax Ordinance, 2001 against the TV actor. The actual quantum of income and receipts could be much higher given the work and repute of TV actor. His professional profile as detailed below reflects his base of income.

He has also declared other income at Rs 672,589 in the return for the tax Year 2011 and exemption has been claimed for the same. Nature of this income and admissibility of the claim of exemption needs to be ascertained. Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits.

Tax profile of another person revealed that a famous actor and fashion designers’ tax profile speaks volumes of the scant attention paid to fulfilling the obligation of proper payment of taxes. No return is filed for Tax Years 2011 which needs to be enforced along with wealth statements.

Declared receipts are less than those identified from Pakistan Revenue Automaton Limited (Pral) database for Tax Year 2010. Action is warranted for not declaring the true particulars of income, FBR said. Another point of note is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered. The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making tax collected from payments on account of such services a minimum tax liability.

Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon subjected to minimum tax. Although return for Tax Year 2010 is filed under normal law, however, no minimum tax is paid on the services receipts which calculate far greater than the tax on total income at Rs 441,700.

The profit and loss (P&L) expenses at Rs 917,800 also seem inflated to reduce the incidence of taxation. In view of the minimum expenditure on account of services rendered in professions like that of this fashion designers, it is proposed that a thorough scrutiny of the claimed expenses be carried out by invoking the provisions of section 177 of the Income Tax Ordinance, 2001.

Tax profile said that retails turnover at Rs 4,700,000 is declared in the tax return for the year 2010 for which clarification needs to be obtained. Given above are some of the payments received by the said actor-cum- fashion designer. The actual quantum of his income is, however, expected to exceed far beyond these identified receipts considering his fame and repute. He earns income not only from acting but also runs a famous boutique for his designer products by the brand name in Karachi. A measure of the extent of his income could be judged from the details given below.

Tax profile said he was in the fashion industry since long and had been running a boutique with his own clothing line under a famous brand name. Recently a new clothing line branded has also been launched in partnership with another famous actor of Lahore.

Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR added.

Tax profile of the hot favourite actor and singer of Pakistan also reflects disappointing situation as far as tax payments are concerned. Tax profile said the prominent singer, actor, model and painter, had been on Tax Roll since 2004 and has been filing Income Tax returns since 2009.

Needless to mention that his versatility in the field of creative arts has made him as one of the most popular and sought after artists, both in Pakistan and abroad. Scrutiny of his Tax Returns, however, raises substantial doubts about a truthful and above board declaration and calls for a thorough investigation. Here are some of the grave discrepancies unearthed by Directorate General I&I-IR.

Like most of the media personalities, he has been religiously offering only those receipts for taxation which have somehow been subjected to withholding taxes. Declaration of such receipts is both convenient for claiming credit of the tax deducted at source and unavoidable for the imprudence in hiding such documented receipts. It is clear that for Tax Year 2010, the declared receipts are even less than those worked back from the tax deducted at source whereas for Tax Year 2011, only receipts of Rs 6,458,734 are declared over and above those worked back from tax deducted at source.

It has to be borne in mind that the period relevant to Tax Years 2010 and 2011 is one of the pinnacles of fame for this superstar. There are some very obvious incomes/receipts which have not suffered the incidence of withholding of taxation. Some very obvious sources of such receipts are mentioned in the individual tax profile.

Enjoying a huge fan-club, his concerts are most the eagerly awaited events both in Pakistan and outside. Additionally, he also performs on the famous live music show, TV programme sponsored by a soft drink company, which is one of the most popular music programme in Pakistan aired on most of the TV channels. Detailed probe into his income from concerts and music show is expected to prove vital in unravelling the true tax potential in this case.

In case of movies, tax profile said that Bollywood (Indian film Industry) is another lucrative source of income for this film actor. Consequent upon the phenomenal success of his first movie, he has gained a firm foothold in the Bolloywood. The fabulous success of the movie is reported to have brought enormous riches for him, both in terms of fame and money. He has subsequently done two more Indian movies.

As a resident individual (in which capacity returns for Tax Years 2010 and 2011 are also filed), both the Pakistan and foreign sources of income of superstar are taxable in Pakistan, but as the figures in the above table would indicate, he has failed to offer such income for taxation in Pakistan.

In case of service receipts earned outside Pakistan, a reduction in tax rate (@1%) is provided by clause 3 of Part II of Second Schedule to the Income Tax Ordinance 2001, but only if these are brought to Pakistan in foreign exchange through normal banking channels. Service receipts earned outside Pakistan and brought otherwise are to be subjected to tax at the normal rates.

Under-declaration of receipts, however, is only one part of the failure to disclose true particulars of income. Another appalling aspect is the claim of excessive P & L expenses to reduce the net income.

The nature of his business is rendering of services against which incurring of such huge expenditure defies logic. To give an indication of how much expenditure accrues to him in earning income from different sources, a single instance is mentioned which also furnishes an index of the quantum of his income.

A telecom company has paid a sum of Rs 19,946,817 during the period relevant to Tax Year 20ll for being its Brand Ambassador. One could fairly ask as to what kind of expenditure he might have incurred for working as a Brand Ambassador of a business concern. It is fact that most of this business ventures are of the nature where the expenditures are predominantly (if not wholly) borne by the sponsors. It is therefore more than obvious that the huge claim of expenditure is an attempt to reduce the actual size of income and resultant taxation.

Another point pertinent to his claim of expenses is the fulfilment of obligation as withholding agent. Even if one ignores the justifiability of his excessive claim of expenses for the time being, the provisions of Section 153(1) (i) of the Income Tax Ordinance 2001 require every individual having turnover of 50 million rupees or above to deduct withholding taxes on various payments made. Since his turnover exceeds the above threshold, he falls in the definition of the prescribed persons for withholding taxes u/s 153 of the Income Tax Ordinance, 2001.

Similarly, withholding taxes were also to be deducted from any salaries paid to employees. Apart from the withholding tax default and attraction of additional taxes consequent upon the failure to meet this obligation, a number of expense from which withholding taxes have not been deducted are also inadmissible in terms of the provisions of section 2 1(c) of the Income Tax Ordinance, 2001. As per the Pral database, he has not filed any statement for withholding taxes u/s 165 etc which points either to (a) fake claim of expenses or (b) non-deduction of taxes thereon. In both situations, the claim of expenses becomes inadmissible.

Tax profile said that what is hidden behind the under-declaration of receipts and excessive claims of profit and loss (P & L expenses) has come to light in the wealth and reconciliation statements. This is manifest from the reconciliation statement filed with wealth statement as on June 30, 2011.

As evident from above details, net assets have recorded an increase of Rs 51,994,103. After accounting for the income declared, and personal and other expenses for the year, there remains an increase of Rs 39,663,442, which has been attributed to “profit on sale of plots”. The position of plots in the hands of this superstar, however, tells a different and interesting story. As per the wealth statement as on June 30, 2010, he has shown three plots at DHA Lahore with a net worth of Rs 6,000,000. These are the plots which have, also been shown in the wealth statement as on June 30, 2009 for the same value. However, in the wealth statement as on June 30, 2011, he has declared seven plots with a total worth of Rs 25,500,000.

The claim of pocketing an income of Rs 39,663,442 in transactions involving the disposal of three plots worth Rs 6,000,000 and in their stead purchase of seven plots for a consideration of Rs 25,500,000 could at best be termed as outlandish. A facet of further irony is the fact that all the disposed off and purchased plots are situated at the same location ie DHA Lahore therefore any huge difference in their prices could be conveniently ruled.

To disentangle the mystery, it has to be noted that the period relevant to Tax Year 2011 is one of windfall returns for his consequent upon his success in the Bollywood which opened up many vistas of income for him both in Pakistan and outside. Many of such returns did not suffer the incidence of withholding taxes, particularly his income related to ventures outside Pakistan.

He, however, persisted in disclosing only those receipts which have been subjected to deduction at source for the two-fold reason of, first claiming the tax deducted thereon and second, the inadvisability of concealing such documented receipts. However, the resultant impact of the undeclared income on the net assets in the wealth statement has been attributed to gain on sale of plots, purely because such gain enjoyed exemption from taxes for the Tax Year 2011.

Notwithstanding the above facts, it has to be noted that claimed sale and purchase of plots also constitute business within the meaning of section 2(9) of the Income Tax Ordinance, 2001 being adventure in the nature of trade, FBR added. The FBR recommended that for the spelled out facts in the preceding lines, immediate action is warranted in the instant case on the following suggested lines.

A thorough investigation into the different sources of income needs to be carried out by invoking the provisions of section 177 of the Income Tax Ordinance, 2001, more specifically about receipts from outside Pakistan, to acquire the actual quantum of income and subject it to taxation.

The FBR further recommended that the details of all the claimed expenses need to be obtained and subjected to proper scrutiny to ascertain their genuineness/admissibility. Statement of withholding taxes needs to be enforced immediately for the Tax Year 2011. This is expected to prove of immense help in substantiating the claim of expenses.

For the immovable properties purchased and disposed off, co-ordinated action is needed on the following lines: Details and documentary evidence of all the properties purchased and disposed off need to be obtained and actual sale/purchase price determined in line with the relevant Rules and keeping in view the market price of properties in the same location.

Details of the persons/parties to whom properties have been sold and from whom purchased need to be obtained to ascertain their tax status and probe sources of investment in their cases also. Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR added.

Tax profile of another prominent actress followed the same pattern as evident from other profiles of actors, models and singers and big screen stars. She is a very a popular actress, director and model. In addition to working for various productions houses/TV channels, she also runs her own production house under the banner of A. Films. She is on the tax Roll as per the Pral database but has not filed the return of income for Tax Year 2011 which may be enforced along with the wealth statements.

The declared receipts for Tax Year 2010 seem to be grossly understated, considering the work and repute of this model. A measure of the extent of her income could be obtained from the given details, which enumerates some of her works.

Tax profile revealed that another point of note is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered. The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making the tax collected from payments on account of such services a minimum tax liability.

Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. Though return for Tax Year 2010 has been filed under normal law, no minimum tax has been offered on the services receipts. Additionally, the claimed expenses also seem inflated. Invoking the provisions of section 177 of the Income Tax Ordinance and detailed scrutiny of the sources of income and claim of expenses could prove of immense value in tapping the true tax potential of the case.

Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR added. Tax profile of a prominent Pakistani actress revealed that she has been receiving income from a variety of sources as reflected from her Tax Return for the Tax year 2011. However, as per the Pral database, Income Tax return has only been filed for the Tax year 2011. Tax returns for the other years need to be enforced along with wealth statements.

Professional profile vis-à-vis declared income: She is a versatile actress with a variety of project on her credit. Even in the media industry, she has been earning income from multifarious sources such as acting, drama production, hosting shows and working in various commercials. Some of her works are highlighted hereunder, FBR said.

The FBR’s tax profile further said that in the income tax return for the Tax Year 2011, she has declared receipts at Rs 3,390,700 on account of ‘other services u/s 153(6)’ under the final tax regime and has also proportionated related expenses at Rs 414,794 against the total income.

The exact nature of these receipts needs to be determined by invoking the provisions of section 177 of the Income Tax Ordinance, 2001 in her case. There is likelihood that these receipts comprise services receipts to which section 153(1) (b) of the Income Tax Ordinance 2001 applies.

Through the Finance Act 2009, provisions of section 153 of the Income Tax Ordinance 2001 were amended and tax collected from payments made on account of such services made minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon treated as minimum tax liability. In such an eventuality, amendment u/s 122 will be warranted. This fact also needs to be given due cognisance while enforcing returns for the rest of the years.

Exemption has been claimed for the capital gain at Rs 8,936,248. Nature of the asset(s) disposed off needs to be ascertained along with the taxability of income derived from such assets in the preceding years, FBR said. Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits.

Tax profile of another actors revealed that the famous TV and film actor and show host is a non-filer of the Income Tax returns as per the Pral database. Returns of income for various years need to be enforced immediately with wealth statements. Another point of note is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered. The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making the tax collected from payments on account of such services a minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. While enforcing tax returns for Tax Years 2010 and 2011, this facet of the case may be given due cognisance, tax profile said.

Tax deducted at four percent from the receipts identified for Tax Year 2011 is less than even the rate applicable to services receipts. Reasons for this need to be confirmed and appropriate action under the law need to be initiated in case of any default on the part of withholding agent, FBR said. Given above are some of the payments received by this actor. The actual quantum of his income is, however, expected to exceed far beyond these identified receipts considering his fame and repute. A measure of the extent of the his income could be obtained from the details given hereunder, which enumerate his various venture as well as nomination/receipt of various awards. Recently a new clothing line branded has also been launched by him in partnership with another famous actor.

Details of foreign travelling (made during last five years) of the said taxpayer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR added. Tax profile of another actor showed that first point of note in this case is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered.

The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making the tax collected from payments on account of such services, a minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. However, the downloaded details of the returns filed as per “Mahasil” show that the calculated tax on the declared income is far less than the minimum tax payable on services receipts.

The lesser income worked out is likely to be due to an inflated claim of P & L expanses which otherwise are expected to be minimal considering the nature of services rendered. Given all this, provisions of section 177 of the Income Tax Ordinance, 2001 need to be invoked to scrutinise the claim of expenses and the sources of income in the instant case.

As per the information available on integrated tax management system (ITMS), she has purchased a Toyota car in the period relevant to Tax Year 2011 for a consideration of Rs 1,337,000. The said vehicle has been registered on 27.06.2011 with registration number LEB-11-9137. The declared income is not sufficient to cover this investment, and at the same time the possibility of other investment could not be ruled out. Wealth statements are therefore needed to be enforced with reconciliation statements. Additionally, the declared assets in the wealth statements also need to be looked into from the angle of accruing any other income for her.

Given above are some of the payments received by this actor. The actual quantum of her income is, however, expected to exceed far beyond these identified receipts considering her fame and work. Royalty income from novels needs to be worked out during the previous years as well, so as to tax the same under head “Income from other sources.” A measure of the extent of her income could be obtained from the given details.

Details of foreign travelling (made during last five years) of the said tax payer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR said.

Another profile of a famous actress revealed that she hosts the programme on a private TV channel. She is tax return filer but only since Tax Year 2011, although she is associated with the media industry for the last 10 years (as claimed by her own TV channel). Even for Tax Year 2011, she has failed to file a wealth statement despite the fact that her income exceeds the threshold for filing one.

Returns for the preceding years along with wealth statements need to be enforced. Given above are some of the receipts of this actress for which she has failed to file a return. These, however, do not exhaust all her sources of income. She is also working with the Muslim Council of Britain, Evening Standard, Eastern Eye, Daily Mirror and blogs for The Guardian’s Comment. Her documentary ‘Unsung Heroes’ was nominated for the Banff Awards. It is pertinent to point out that as a resident individual, her both Pakistan and foreign sources of income are taxable in Pakistan.

It has also to be noted that the Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making tax collected from payments on account of such services a minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon subjected to minimum tax, tax profile added. FBR also sought details of foreign travelling (made during last five years) of the said taxpayer.

Tax profile of another actors revealed that as per the Tax Return for the Tax Year 2011, Faisal Rehman has declared his principal (business) activity as ‘other personal service activities etc”. Receipts on this account have been offered for taxation under normal law. Following omissions/mis-declarations need to be addressed.

As per the amended provisions of section 153 of the Income Tax Ordinance 2001, tax collected from payments on account of services constitutes minimum tax liability w.e.f. tax year 2010. For the Tax Year 2011, minimum tax on service receipts of Rs 5,106,965 calculated to Rs 306,417 whereas he has offered tax of only Rs 30,292 calculated on the net income of Rs 403,893. Non-payment minimum tax on service receipts calls for both clarification and necessary action under the law by invoking the provisions of section 177 of the Income Tax Ordinance, 2001.

The P & L expenses claimed for the Tax Year 2011 at Rs 4,703,072 against the services receipts, which primarily involves personal and professional acumen of the taxpayer, seems unjustified/overstated. The nature of the expenses and their justifiability under the law needs to be checked by invoking the provisions of section 177 of the Income Tax Ordinance, 2001.

According to FBR, tax profile of a top singer of Pakistan is also very disappointing. She has been one of the most prominent female singers of the country in the last decade and continues to carry the reputation of being the most popular female voice in the media industry. Unfortunately, though, she has failed to fulfil her obligation of filing Income Tax returns despite earning substantial income. Returns of income for various years, therefore, need to be enforced immediately with wealth statements.

Another point of note is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered. The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001, making the tax collected from payments on account of such services a minimum tax liability. Thus, w.e.f. Tax Year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. While enforcing tax returns for Tax Years 2010 and 2011, this facet of the case may be given due cognisance.

As a resident individual, her both Pakistan and foreign sources of income are taxable in Pakistan. However, it has been noted that tax has been deducted at less than six percent which is the rate applicable to the services and contracts. For ensuring proper incidence of taxation in the instant case, it is essential to ascertain the true nature of all her receipts and subject them to taxation at appropriate rates. Action against the withholding agents is also required to be taken if tax has not been deducted at proper rates from her receipts, tax profile said.

Her popularity in singing has opened up many vistas of lucrative sources of income such as sale of music albums, holding of concerts both in-country and outside, working in commercials and appearing in various TV shows. The Government of Pakistan has conferred “Tamgha-e-Imtiaz” in recognition of her work in the field of music, FBR added.

Another famous TV and film actor, model, drama producer and director, is a non-filer of the Income Tax returns. Returns of income for various years need to be enforced immediately with wealth statements, tax profile of another actor said.

Another point of note is the taxability of the income in the instant case under normal law and the minimum tax leviable to receipts on account of services rendered. The Finance Act 2009 amended the provisions of section 153 of the Income Tax Ordinance 2001 making the tax collected from payments on account of such services a minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability. While enforcing tax returns for Tax Years 2010 and 2011, this facet of the case may be given due cognisance.

The actual quantum of his income is, however, expected to exceed far beyond these identified receipts considering his fame and repute. Humayun is considered the highest paid actor on the circuit. He runs his own production house and also produces dramas in collaboration with another famous actor/producer in a joint venture by the name of entertainment. The magnitude and scale of joint venture could be ascertained from its website.

Tax profile of another TV actor showed that he has been involved in under-statement of taxes. The nature of his business, which he has himself decaled as “other personal service activities”, goes against the classification of his business receipts under the final tax regime. Through the Finance Act 2009, provisions of section 153 of the Income Tax Ordinance 2001 were amended and tax collected from payments made on account of such services made minimum tax liability. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the final tax regime and the tax deducted thereon constitutes minimum tax liability.

Necessary action for taxing his income under normal law and treating tax deducted from services as minimum tax liability is required. No wealth statements have been filed which need to be enforced, tax profile added. He has conveniently offered for taxation, only those receipts from which withholding taxes have been deducted even he has failed to declare his salary income from a production house in Tax Year 2011. His profile indicates that he is deriving income from a variety of sources. His sources of income span even beyond Pakistan as indicated by his work for Sony Entertainment India and Prime TV London. He is also a director and producer, and has created a Film Productions House, which is now established as one of the best Pakistani television production companies, making dramas, magazine programmes, documentaries, musicals, tele-movies and other TV shows both in Urdu and Sindhi languages. Details of foreign travelling (made during last five years) of the said tax payer may please be obtained from Immigration Wing, FIA which maintains complete records of foreign visits, FBR added.

Tax profile of another top actress revealed that she is celebrated as Pakistani Supermodel, actress and designer. She has her own Signature Lawn which she showcases even outside Pakistan in countries like Bangladesh, India and UAE. Nadia Hussain was selected as one of the Bridal Asia in India for her modelling. Other than fashion shows, she is also performing in commercial campaigns. In addition to that she is a professional dentist as well. However, despite all this versatility, she has been declaring receipts only from services (her return for Tax Year 2011 mentions principal activity as “other personal services”). This clearly points out towards concealment of some very lucrative sources of income.

As per the amended provisions of section 153 of the Income Tax Ordinance 2001, tax collected from payments on account of services constitutes minimum tax liability w.e.f. tax year 2010. For the Tax Year 2011, minimum tax on service receipts of Rs 6,496,094 calculates to Rs 389,766, whereas Nadia Hussain has offered tax of Rs 270,552 calculated on the net income of Rs 1,352,760. Non-payment minimum tax on service receipts calls for both clarification and necessary action under the law.

The P&L expenses claimed for the Tax Year 2011 at Rs 4,393,334 against the services receipts, which primarily involves the personal and professional acumen of the taxpayer, seems unjustified/overstated. The nature of the expenses and their justifiability under the law needs to be checked by invoking the provisions of section 177 of the Income Tax Ordinance 2001. The nature of receipts declared at Rs 838,450 on account of “other services” also needs to be ascertained.

In addition to the P & L expenses, deductions on account of 750,000 are claimed on account of Zakat which needs verification. No wealth statement has been filed despite the fact that income exceeds the threshold for filing wealth statement, tax profile added.

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