Pkrevenue.com

Day: June 6, 2019

  • FBR to reduce withholding tax provisions under World Bank program

    FBR to reduce withholding tax provisions under World Bank program

    ISLAMABAD: Federal Board of Revenue (FBR) is required to reduce number of withholding provisions to strengthen the income tax and take out this system from indirect taxes.

    According to funding approved by the World Bank for Pakistan Revenue Mobilization Project, the FBR is required to reduce the scope of withholding regime.

    The World Bank said that the funding requires a reduction in the types of transactions subject to income tax withholding.

    “It contributes directly to transparency of the tax system, given that the withholding regime transforms income taxes into indirect taxes, which are less visible to taxpayers. It will also greatly reduce compliance costs for firms that have to act as withholding agents.

    The World Bank also approved funds for transparent tax system for Pakistan. The World Bank said that under this funding the authorities require detailed reporting of tax expenditure in the annual budget documentation with disaggregated information about the cost and beneficiaries of each exemption and concession.

    “It is important to broadening the tax base because it exposes the revenue foregone due to each exemption/concession, and the industries that benefit.”

    The World Bank also stressed on coordination of the FBR with provinces. Under this funding program the FBR needs to reach agreements with the provinces on automated sharing taxpayer information, the methodology for calculating GST input adjustments, and common updated property valuation tables.

    “This coordination will enable the FBR and the provinces to broaden their respective tax nets. Coordination can be facilitated through the newly established Fiscal Coordination Committee, comprising the federal and provincial governments.”

  • MCC Multan announces auction of confiscated vehicles on June 12

    MCC Multan announces auction of confiscated vehicles on June 12

    ISLAMABAD: Model Customs Collectorate (MCC) Multan has announced public auction of confiscated vehicles on June 12, 2019 to be held at Customs Dry Port, Multan.

    Following vehicles to be presented for auction:

    01. Nissan X Trial Jeep, Model 2001, Chassis No.NT30134875, Engine No. 475365A-QR20, 2000CC.

    02. Daihatsu Coure Car, Model -1990, Chassis No. JDAL200S000853247, Engine No. GKDS 659-CC

    03. Toyota Hilux Surf, Model 1990, Chassis No. LN130-0019025, Engine No. 2L-19023782446-CC

    04. Honda Civic Car Hybrid, Model 2008, Chassis No. JHMFD36206S204777, Engine No. FD3 1331-CC

    05. Toyota Passo Car, Model 2007, Chassis No. KGC10-0148658, Engine No. 1KR-FE 1000CC

    06. Toyota Corolla Car, Model 1992, Chassis No. AE100-3098323, Engine No. 5A-4677005 1498-CC

    07. Toyota Corolla Car, Model 1994, Chassis No. AE100-3250841, Engine No. 5AB-688138 1498CC

  • FBR is not organized revenue authority

    FBR is not organized revenue authority

    ISLAMABAD: Federal Board of Revenue (FBR), unlike most revenue authorities in the world, is not organized along functional lines, nor does it have a clear hierarchical structure.

    This was stated by the World Bank in its report on Pakistan taxation.

    It said: The FBR is a large organization with a nationwide presence and more than 21,000 staff, of whom about two thirds work for Inland Revenue Service (IRS) and one third for Pakistan Customs.

    It further said despite a government target for women to reach 10 percent of public employees, the FBR has only 962 women staff (4.6 percent).

    However, women are better represented among professional-grade staff (grades 17+), accounting for 17.6 percent of total staff in grades 17-22.

    The two services have separate career structures and human resource practices with limited shared services (e.g. accounting).

    Their audit functions, ICT systems, and territorial formations (Regional Tax Offices/Large Taxpayer Units for the IRS, Customs stations and control points) are also separate.

    The IRS is organized along tax instruments, territorial jurisdictions, and taxpayer segments (e.g. Large Taxpayer Units) rather than functions (e.g. taxpayer registration, assessment, tax audit).

    “A mixed function-based and segment-based structure is considered more efficient, as it enables technical specialization of staff, automation of business processes by function, fewer offices, and complete taxpayer profiles – rather than separate records for each tax instrument as is the case in the FBR,” the World Bank said.

    In terms of management structure, the FBR Act assigns the decision-making functions to the Board with limited powers for the Chairman.

    In turn, Board Members are responsible for different functions but do not oversee FBR territorial formations, where most FBR staff are deployed.

    Moreover, IRS Directors-General report directly to the FBR Chairman rather than Board Members.

  • Monthly sales tax return filing main reason for Pakistan’s low ranking in paying taxes

    Monthly sales tax return filing main reason for Pakistan’s low ranking in paying taxes

    ISLAMABAD: The requirement of filing monthly sales tax return is the main reason for Pakistan’s low ranking in the Paying Taxes Indicator of the World Bank.

    The World Bank in a recent report on Pakistan taxation said that the country’s tax system is complex due to overlapping jurisdictions with different laws, exemptions, and frequent policy changes.

    It said that service providers operating across Pakistan are obliged to file sales tax on services returns with all five jurisdictions every month, resulting in a total of 62 tax returns based on five different sets of rules and formats for sales tax on services alone.

    “The requirement to file monthly sales tax returns is one of the main issues for Pakistan’s low

    score and ranking in the Paying Taxes indicator, which is the country’s worst ranking in the 2019 Doing Business report.”

    Pakistan is ranked 173nd among 190 economies for this indicator with 47 payments and an estimated time to comply with tax obligations of 293.5 hours per year, down from 311.5 in the previous year.

    The World Bank said that the Constitution assigns income taxes (except for income derived from agriculture), Sales Tax on goods, customs duties, federal excises, and the Capital Gains Tax (CGT) to the federal level.

    These taxes are collected by the Federal Board of Revenue (FBR).

    The Constitutions assigns the following taxes to the provinces: sales tax on services, tax on professions, Agricultural Income Tax (AIT), Motor Vehicle Tax (MVT), Urban Immovable Property Tax (UIPT), and other taxes related to real estate (e.g. stamp duty, Capital Value Tax).

    This tax assignment essentially fragments Pakistan into five markets in the services sector, with important consequences for tax authorities and taxpayers alike.

    The World Bank said that several taxes are often levied on the same transaction (e.g. stamp duty, registration fee, Capital Value Tax, and Capital Gains Tax on property transactions) and/or affect the same taxpayer segments (e.g. professionals are liable to income tax, professions tax, and sales tax on services).

    Double taxation is particularly serious problem for firms that provide services across the country.

    These firms are liable to Corporate Income Tax paid to the FBR and sales tax on services paid to each of the provinces where they operate and to the FBR for operations in the Islamabad Capital Territory.

    The five jurisdictions have different rates for sales tax on services and apply different principles in levying this tax (e.g. some levy the tax based on the firm’s registered address, others based on the customer’s location).

    Disagreements on the definition of goods and services also affect the restaurant and catering sector, which the federal level subjects to sales tax on goods (food and beverages), while the provinces also levy sales tax on services.

  • Taxation not widely considered as civic duty in Pakistan

    Taxation not widely considered as civic duty in Pakistan

    ISLAMABAD: The taxation has not been widely considered as civic duty in Pakistan, the World Bank said in a report issued recently.

    The World Bank said that tax evasion is pervasive due to low tax morale and legal loopholes that enable high-value individuals to conceal their incomes.

    Few Pakistani citizens think of themselves as taxpayers, even though they pay indirect taxes on their consumption. “Therefore, taxation is not widely considered as a civic duty and essential to finance public services.”

    The report said that in turn, better-off households generally do not rely on public education or health services and have little stake in paying taxes to finance better public service provision.

    At the same time, tax evasion is facilitated by legal loopholes.

    The Law on Benami Transactions of 2016, which prohibits anonymous transactions, could have closed one of the major loopholes.

    It has not however been implemented because secondary regulations have not been approved.

    Prize bonds, a large source of domestic borrowing for the government, have hitherto been both anonymous and tax exempt, making them an instrument of choice for investing funds of unexplained origin.

    Likewise, foreign remittances are tax exempt and widely used to repatriate illegally exported capital.

    Low taxes on immovable property also offer opportunities for tax evasion and money laundering.