Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • Business community hails decision to simplify tax laws

    Business community hails decision to simplify tax laws

    KARACHI: Business community has praised Prime Minister Imran Khan for issuing directives to the authorities for focusing on tax reforms, simplification of tax laws and plugging loopholes in existing tax system, a statement said on Sunday.

    Mian Nasser Hyatt Maggo President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) lauded Prime Minister Imran Khans directives to focus on reform in tax regime, simplification of tax laws, plugging existing loopholes, reduction in discretionary powers of tax collectors, automation to bring transparency in tax system.

    He said that it is heartening that Prime Minister is equally concerned with the tax reforms for accelerated growth. He said that understanding of Prime Minister in this regard shows his deep insight on the issues that are impeding economic growth with great attachment to the business community of Pakistan.

    He further stated that the Prime Minister has rightly taken up the issue of reforms in tax regime. The structure of taxation in our country is regressive, with indirect taxes accounting for major of total federal government tax collection.

    Tax collection is also disproportionate; industry being overburdened with tax payment of more than 60 percent against about 20 percent size in GDP. The present tax structure is complex because of overlapping jurisdictions with different laws and frequent policy changes through on almost daily basis by issuance of instructions, clarifications, changes in rules, CGOs, STGOs, ITGOs.

    The income tax, GST on goods, customs duties, federal excises is collected by the FBR while GST on Services is collected by provincial Revenue Boards/Authorities which also fragments Pakistan into five business market economies.

    The withholding tax regime of over 65 in numbers is also problematic and businessmen have been made withholding agents to deposit the tax for FBR.

    The President FPCCI said that the tax returns should be simplified and easily understandable particularly for SMEs and make it single page document. The present system requires almost all the tax returns filing persons to have further burden of associating the service charges of tax consultants and lawyers due to complicated tax operating system.

    He also informed that he has already written letter to Prime Minister for considering various suggestions on required tax reforms including complex Income Taxation to change to Flat Rate Taxation, taxation system to induce investments, multiple sales tax to change to single stage sales tax across the Board with exemptions on food, live saving drugs, educational instruments. Further the low rate Custom duties without additional custom duties, regulatory duties are answerable to impeding connived smuggling, mis-declaration. The Appellate tax system should be converted into independent tax judicial system in conformance with the requirement of constitution to increase the trust of businessmen in the taxation system.

    Mian Nasser Hyatt Maggo said that taxpayers bill of rights, protection of businessmen against retaliations by tax officials and accountability of tax officials should constitute fundamental to the requirements of tax reforms. The FPCCI has been demanding withdrawal of discretionary powers vested with the tax officials to avoid their misuse as presently FBR has become show-cause generating machinery for existing taxpayers, as are being informed to us at large.

    He stated that to wipe-out corruption there is need to improve automation in tax system and develop local software and Apps with simplified system so that interaction of human resource should be reduced and strengthening of information technology system can combat issuance of connived bogus sales tax refunds which not only affect government revenue but also damage business community credibility and trust.

    Mian Nasser Hyatt Maggo the President of the federation of Pakistan chambers of Commerce and Industry appreciated that a very good move has been done by present government by separating tax policy unit under Ministry of Finance and not under revenucracy adjustment methods of FBR who are only making tariff rate adjustments and making changes in statutes on compulsions due to observations of High courts and Supreme courts during budgetary exercises.

    He said that may be this year the budgetary exercise if is done by tax unit in Ministry of Finance may lead to compliance with directives of Prime Minister on tax reforms.

  • Computation of taxable income defined

    Computation of taxable income defined

    Income Tax Ordinance, 2001 has explained procedure for computation of taxable income.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained COMPUTATION OF TAXABLE INCOME under Sections 9, 10 and 11 of the ordinance.

    9. Taxable income.—The taxable income of a person for a tax year shall be the total income under clause (a) of section 10 of the person for the year reduced (but not below zero) by the total of any deductible allowances under Part IX of this Chapter of the person for the year.

    10. Total Income.— The total income of a person for a tax year shall be the sum of the —

    (a) person’s income under all heads of income for the year; and

    (b) person’s income exempt from tax under any of the provisions of this Ordinance.

    11. Heads of income.— (1) For the purposes of the imposition of tax and the computation of total income, all income shall be classified under the following heads, namely: —

    (a) Salary;

    (b) Income from Property;

    (c) Income from Business;

    (d) Capital Gains; and

    (e) Income from Other Sources.

    (2) Subject to this Ordinance, the income of a person under a head of income for a tax year shall be the total of the amounts derived by the person in that year that are chargeable to tax under the head as reduced by the total deductions, if any, allowed under this Ordinance to the person for the year under that head.

    (3) Subject to this Ordinance, where the total deductions allowed under this Ordinance to a person for a tax year under a head of income exceed the total of the amounts derived by the person in that year that are chargeable to tax under that head, the person shall be treated as sustaining a loss for that head for that year of an amount equal to the excess.

    (4) A loss for a head of income for a tax year shall be dealt with in accordance with Part VIII of this Chapter.

    (5) The income of a resident person under a head of income shall be computed by taking into account amounts that are Pakistan-source income and amounts that are foreign-source income.

    (6) The income of a non-resident person under a head of income shall be computed by taking into account only amounts that are Pakistan-source income.

  • Taxpayers require to update profile by March 31 to avoid exclusion from ATL

    Taxpayers require to update profile by March 31 to avoid exclusion from ATL

    ISLAMABAD: Taxpayers are required to update their profile by March 31, 2021 to avoid exclusion their names from Active Taxpayers List (ATL).

    The last date for updating the profile was December 31, 2020. However, it was extended up to March 31, 2021.

    Updating profile by all the taxpayers registered under Section 181 of the Income Tax Ordinance, 2001 and other conditions specified by the Federal Board of Revenue (FBR) is a mandatory requirement under Section 114A of the Ordinance.

    Through Finance Act, 2020, the Section 114A was introduced to make the updating profile mandatory for following persons:

    (a) every person applying for registration under section 181;

    (b) every person deriving income chargeable to tax under the head, “Income from business”;

    (c) every person whose income is subject to final taxation;

    (d) any non-profit organization as defined in clause (36) of section 2;

    (e) any trust or welfare institution; or

    (f) any other person prescribed by the Board.

    The FBR explained the newly introduced section as: “Complexity of return forms is an embodiment of the complexity of tax law. Nevertheless, there is a dire need to simplify return forms without compromising on data required to verify accuracy of the declared version.”

    The FBR said that instead of endeavoring to obtain all the relevant information in the income tax return, a new section has been added wherein taxpayers profile may be prescribed in order to capture data relevant to the taxpayer.

    It said that persons who are already registered before September 30, 2020 and are deriving business or incomes subject to final taxation, trusts, welfare institutions, non-profit organizations and such other persons prescribed by the FBR are proposed to file a profile on or before December 31, 2020, which is not extended up to March 31, 2021.

    Persons who obtain their registration after September 30, 2020 are proposed to furnish such profile within 90 days of registration. In case of any change in particulars of information, such persons shall update their profile within 90 days of the change in particulars. The profile contains information relevant to income regarding bank accounts, utility connections, business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer, types of businesses and such other information as may be prescribed by the FBR.

    The FBR said that if a person fails to furnish or update a taxpayer’s profile within the due date or time period as extended by the FBR under Section214A, such person shall not be included in the active taxpayers list for the latest tax year ending prior to the aforesaid due date or extended date.

    However, upon filing or updating the profile, such persons shall be allowed to be placed on the active taxpayers list upon payment of surcharge which is Rs20,000 in the case of a company, Rs10,000 in the case of an association of persons and Rs1,000 in the case of an individual.

    Further, a penalty for non-filing or not updating of profile is also proposed at the rate of Rs2,500 for each day of default subject to minimum penalty of Rs10,000.

  • Careless bank record keeping creates difficulties for foreign currency account holder

    Careless bank record keeping creates difficulties for foreign currency account holder

    KARACHI – A Foreign Currency Account (FCA) holder faced immense inconvenience when his bank was unable to trace his long-maintained account. According to the 2020 Annual Report issued by the Office of Banking Mohtasib Pakistan, the complainant claimed that he had opened an FCA with a local bank branch in 1996 before leaving for Saudi Arabia.

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  • KTBA recommends daily update of ATL file; banks not relying on online verification

    KTBA recommends daily update of ATL file; banks not relying on online verification

    KARACHI: Karachi Tax Bar Association (KTBA) has advised the Federal Board of Revenue (FBR) to update Active Taxpayers List (ATL) on daily basis instead weekly as banks were not relying on the online verification of the active taxpayers for purpose of withholding tax deduction.

    The KTBA on Saturday said that many taxpayers are making payment of surcharge U/s.182A of the Income Tax Ordinance, 2001 (Ordinance) for inclusion of their names in the ATL and upon the payment the status of taxpayer is immediately updated in the ATL on the web portal.

    However, the excel file available on the FBR web portal of is not being updated which is causing severe problems to the taxpayers as far as withdrawals from banks are concerned.

    “The banks are not relying on the online verification available on the web portal of FBR,” the KTBA said.

    The KTBA suggested that the excel file (lists) available on the web portal of FBR is updated on daily basis and the banks are also informed to rely on the online verification before withholding deducting the tax on banking transactions in order to facilitate the taxpayers.

    The tax bar said that it had received many complaints that where manual extensions were filed/submitted and where no reply was received (whether granted or refused) and the returns were filed within the time applied for; the names of such taxpayers are also not appearing in the ATL though such cases are liable to be treated as filed within the time allowed.

    The KTBA advised that where taxpayers have filed the manual extensions within time and where the returns have been filed within the time applied for, the names of such taxpayers should be included in the ATL and the ATL be updated immediately without payment of surcharge as prescribed U/s.182A of the Ordinance.

    There are several instances where the taxpayers have opted rightly to file their returns, in time, manually (paper returns) as they were legally not bound to file their returns electronically, their names are also not appearing in the ATL for which we are being informed by our members continuously. We feel that the manual returns have not been digitized and such taxpayers are facing severe problems due to non-appearance of their names in the ATL.

    The tax bar suggested that where taxpayers have rightly filed/submitted their returns manually (paper turns), the names of such taxpayers should be included in the ATL forthwith for their facilitation.

    The KTBA also received complaints from members and have also noticed that there are instances where extension applications have been submitted via IRIS within time and the same are appearing in the outbox of IRIS unattended by the concerned Commissioners and the returns have also been filed within the time applied for but their names are not appearing in the ATL.

    The tax bar said that there is no fault of the taxpayers who have filed the extensions in time that remains unattended and the returns have also been filed within the time applied for.

    It suggested that where taxpayers have applied for extensions on IRIS in time, whose applications have remained unattended and the returns have been filed within the time, the names of such taxpayers should also be included in the ATL forthwith for their facilitation

  • Weekly Review: share market likely rebound sharply on successful PM confidence vote

    Weekly Review: share market likely rebound sharply on successful PM confidence vote

    KARACHI: The share market likely to rebound after Prime Minister Imran Khan successfully attained vote of confidence from the parliament on Saturday.

    Analysts at Arif Habib Limited said that a fresh vote of confidence in the PM and his government is certain to stimulate renewed confidence and optimism in the investment climate.

    However markets could witness pressure in the case of an adverse outcome. Our top picks are HBL, MCB, UBL, OGDC, MARI, KAPCO, HUBC, FFC, LUCK, ENGRO, NML, ILP, and PSO.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.1x (2021) compared to Asia Pac regional average of 17.2x and while offering DY of ~6.8 percent versus ~4.8 percent offered by the region.

    The domestic bourse started the week on a positive note amid expectations of a successful senate election for the ruling government. However the results were a major surprise with the ruling government facing a setback on the hotly contested Islamabad seat, which sent the market tumbling.

    PM Imran Khan’s decision to seek a vote of confidence and expectations of success helped rebound sentiment starkly on Friday. The benchmark KSE-100 index closed the week nominally down (-28 points WoW), settling at 45,837 points.

    Sector-wise positive contributions came from i) Oil & Gas Exploration Companies (54 points), ii) Power (45 points), and iii) Oil & Gas Marketing Companies (32 points). Whereas sectors that contributed negatively include i) Cement (85 points), ii) Pharmaceuticals (39 points), and iii) Textile weaving (16 points). Scrip-wise positive contributors were KAPCO (42 points), TRG (40 points) and BAFL (39 points) while negative contributors included LUCK (45 points), UBL (41 points) and HBL (37 points).

    Foreign selling continued this week clocking-in at USD 10.7 million compared to a net buy of USD 0.3 million last week. Selling was witnessed in Commercial Banks (USD 10.1 million) and Technology and Communication (USD 2.2 million). On the domestic front, major buying was reported by Insurance Companies (USD 8.4 million) and Banks / DFIs (USD 8.0 million). Average volumes arrived at 386 million shares (down by 35 percent WoW) while average value traded settled at USD 129 million (down by 19 percent WoW).

  • FBR signs contract to launch track and trace system from July 01

    FBR signs contract to launch track and trace system from July 01

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday signed a contract with AJCL along with its lead partner Authentix Inc. USA and Mitas Corporation of South Africa to operationalize Track and Trace Solution on Tobacco, Cement, Sugar and Fertilizer Sectors.

    Dr. Muhammad Ashfaq Ahmed, Member (IR-Operations), FBR, Kevin McKenna, CEO, Authentix, Sten Bertelsen, from Mitas Corporation and Omer Jaffer CEO of AJCL signed the Contract on behalf of their respective organizations.

    The track and trace Solution is scheduled to be rolled out across the tobacco, cement, sugar and fertilizer sectors from July 01, 2021 in Pakistan.

    This system will enhance tax revenue, reducing counterfeiting and prevention of smuggling of illicit goods.

    Track and Trace involves implementation of a robust, nationwide, electronic monitoring system of production volumes by affixation of more than 5 billion tax stamps on various products at the production stage, which will enable FBR to track the goods throughout the supply chain.

    Dr. Muhammad Ashfaq Ahmed, Member (IR-Operations), FBR on the occasion said that FBR shall be working closely with AJCL Consortium during the rollout of the program across different industries on very aggressive timelines.

    Kevin McKenna of Authentix stated that the program would help provide a transformational boost to the local economy, enhance revenue and make the tax collection process more transparent.

    CEO AJCL, remarked that the Consortium was looking forward to working with FBR to configure and implement the various components of the solution.

    Around 45million tons of cement, more than 4 billion sticks of tobacco cigarettes, more than 4million tons of sugar and more than 30 million tons of fertilizer would be brought into the tax net.

    This will enhance digitization of economic activity, improve revenue forecasting and curb counterfeit products in the market.

  • Large number of taxpayers denied active status

    Large number of taxpayers denied active status

    ISLAMABAD: Pakistan Tax Bar Association (PTBA) has informed the Federal Board of Revenue (FBR) that a large number of taxpayers who have file returns but their names are not on the new Active Taxpayers List (ATL), which was issued on March 01, 2021 for tax year 2020.

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  • MCB Bank pays penalties amounting Rs191.76 million

    MCB Bank pays penalties amounting Rs191.76 million

    KARACHI: MCB Bank has paid an amount of Rs191.76 million as penalties for various regulatory violations during the year ended December 31, 2020.

    According to financial results released by the bank for the year ended December 31, 2020, the bank paid the amount of Rs191.76 million to the State Bank of Pakistan (SBP) as penalties for violation of various regulations.

    The payment of penalty increased registered a phenomenal growth in the year ended December 31, 2020 when compared with Rs46.07 million paid in the preceding year.

    The rise in penal amount showed the violation of regulatory provisions had increased during the year. The SBP imposes the penalty on banks for mainly violating Know Your Customer (KYC) and provisions related to anti money laundering laws.

  • Grant of disparity reduction allowance at 25pc for government employees notified

    Grant of disparity reduction allowance at 25pc for government employees notified

    ISLAMABAD: The finance division has notified grant of disparity reduction allowance at 25 percent of the basic pay to the civil employees in BS-1-19 of the federal government.

    Sources on Friday said that the finance division had issued a notification for the approval of the Federal Government for grant of Disparity Reduction Allowance at 25percent of the basic pay of Basic Pay Scales 2017 with effect from March 01, 2021.

    This allowance shall be admissible to civil employees in BPS 1-19 of the Federal Government, (including employees of the Federal Secretariat and attached departments), who have never been allowed additional allowance/allowances equal to or more than 100 percent of the basic pay (whether frozen or not) or performance allowance subject to the following conditions:

    a) This Allowance will not be admissible to the employees of the organizations as mentioned in Annexure-I and those employees who are drawing additional allowance/allowances equal to or more than 100 percent of the basic pay whether frozen or otherwise);

    b) This allowance will be frozen at the level drawn on March 01, 2021

    c) This Allowance will be subject to Income Tax;

    d) This Allowance will be admissible during leave and entire period of L.P.R. except during extra ordinary leave;

    e) This Allowance will not be treated as part of emoluments for the purpose of calculation of Pension/Gratuity and recovery of House Rent;

    f) This Allowance will not be admissible to the employees during the tenure of their posting/deputation abroad;

    g) This Allowance will be admissible to the employees on their repatriation from posting/deputation abroad at the rate and amount which would have been admissible to them, had they not been posted abroad;

    h) This Allowance will be admissible during the period of suspension;

    i) The term “Basic Pay” will also include the amount of Personal Pay granted on account of annual increment (s) beyond the maximum of the existing pay scales.

    Annexure-I

    Following is the List of organizations/Employees drawing Extra Allowances

    1. President/ PM Secretariat

    2. Federal Board of Revenue

    3. Health personnel/ Health establishments

    4. National Accountability Bureau (NAB)

    5. All Superior Courts

    6. Law & Justice Commission of Pakistan

    7. Islamabad Capital Territory Police

    8. National Highways & Motorways Police

    9. Islamabad Model Traffic Police

    10. Airport Security Force

    11. Civil Armed Forces

    12. Intelligence Bureau

    13. Inter Services Intelligence

    14. Federal Investigation Agency

    15. National Highways & Motorways Police

    16. National Assembly

    17. Senate Secretariat

    18. Parliamentary Affairs Division

    19. District Population Welfare Office

    20. Clinical Regional Training Institute

    21. Directorate General of Special Education

    22. National Institute of Rehabilitative Medicines

    23. National Institute of Special Education

    24. Rehabilitation Centre for Children with Development Disorders Islamabad

    25. National Council for Rehabilitation

    26. National Braille Press Islamabad

    27. Rehabilitation Unit Vocational Rehabilitation & Employment of Disabled persons Islamabad

    28. National Mobility & Independence Training Centre

    29. National Training Centre for Special Persons G-9/2 Islamabad

    30. Vocational Rehabilitation & Employment of Disabled persons SC-1 Islamabad

    31. Provision of Hostel facilities at NSEC VHC Islamabad

    32. National Special Education Centre for PHC Islamabad

    33. National Special Education Centre

    34. National Library & Resource Centre Islamabad

    35. National Trust for the Disabled

    36. Common Unit to Manage Global Fund

    37. Federal Services Tribunal

    38. Central Health Establishment and its Field Offices

    39. Federal Tax Ombudsman

    40. Appellate Tribunal Inland Revenue

    41. Customs Excise and Sales Tax Appellate Tribunal

    42. Environmental Protection Tribunal

    43. Accountability Courts

    44. Special Judge (Customs Taxation & Anti Smuggling)

    45. Special Judge (Central)

    46. Banking Courts

    47. Special Courts (Control of Narcotics Substance)

    48. Special Court (Offence in Banks)

    49. Special Court (Anti Terrorism)

    50. Competition Appellate Tribunal

    51. Intellectual Property Tribunal

    52. Drug Courts

    53. Anti Dumping Appellate Tribunal

    54. Senior Civil Judge West Islamabad

    55. Senior Civil Judge East Islamabad

    56. District & Session Judge West Islamabad

    57. District & Session Judge East Islamabad

    58. The civilian employees of PAF who are drawing additional allowance as allowed vide Finance Division’s U.O. note bearing No.F.1(7)lmp/2009-705, dated 19-12-2012.