Pkrevenue.com

Author: Faisal Shahnawaz

  • 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.

  • Super tax application may be amended to generate around Rs2 billion

    Super tax application may be amended to generate around Rs2 billion

    KARACHI: Federal Board of Revenue (FBR) may recommend amending application of super tax in the forthcoming budget 2019/2020 to generate around Rs2 billion.

    FBR sources said that the tax authorities had recommended amendments to Section 4B of Income Tax Ordinance, 2001 through Finance Bill, 2019.

    The sources said that it had been recommended to apply super tax on the income computed under Fourth, Fifth, Seventh and Eighth Schedules ‘other than brought forward depreciation and brought forward business losses.

    According to the recommendation, the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.

    As per the ordinance the fourth schedule covers insurance companies, fifth schedule covers exploration and production companies, seventh schedule for banking companies and eighth schedule covers capital gains and National Clearing Company Pakistan Limited.

    The sources said that the proposed amendment will help the FBR to generate around Rs2 billion as revenue.

  • FBR urged to allow one sales tax registration for multiple businesses

    FBR urged to allow one sales tax registration for multiple businesses

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow multiple businesses on one sales tax registration for better documentation of the economy.

    In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that after amendment in Sales Tax Act, 1990, through Finance Act, 2008, FBR has directed to cancel multiple registrations under single proprietorship.

    It said that proprietor having two businesses faces with the dilemma to show his entire sales under one business, which is creating hardship for his customers in their respective returns.

    Moreover, tax department often raise queries as to how a registered person can raise a invoice relating one business if he is registered with the department under another ‘business category’.

    “FBR should issue necessary instructions to incorporate multiple business features in its web-portal to facilitate taxpayers,” the PTBA suggested.

    The PTBA said that by implementing this suggestion it would result in better documentation of economy and proper maintenance of records of taxpayer.

    Highlighting another issue, the PTBA said that the definition of time of supply as amended through the Finance Act, 2013 stating receipt of advance as subject to sales tax, has created number of practical problems because of which sales tax on advance was earlier withdrawn by Finance Act 2007.

    The registered persons besides other practical issues has to undertake a tremendous exercise of reconciliation between the books of account where sales is recorded on the basis of delivery of goods with the sales tax returns where sales tax is paid on advance receipts.

    Furthermore, this also leads to discrepancies in CREST resulting in hardships to taxpayers as well as to the department.

    Therefore, the tax bar proposed withdrawal of the amendment made through the Finance Act, 2013.

    It said that it will help taxpayers to avoid unnecessary hassle as well as for the department; as charging of sales tax on advance receipts will not create any additional revenue for the Government.

    The PTBA also pointed out ‘hire purchase’ transaction involves periodical installments received/earned over a period of time.

    Currently, Sales Tax is being charged on full amount at the time of signing (entered into) of hire purchase agreement.

    The registered is burdened with increased amount of output tax on hire purchase sale at the time of sale although the amount is received from the customers in installments.

    Definition of time of supply’ may be amended and tax should not be levied at the time of signing of HP arrangement.

    Instead, tax should be levied at the time when installment is effected / paid.

    Further, the element of interest embedded in such installment should also be excluded for assessment of sales tax.

    Charging sales tax on full amount at the signing of hire purchase agreement is not justified and is in conflict with the definition of value of supply which states that it is the consideration which the supplier receives from the recipient for the supply.

  • Eid-ul-Fitr Mubarak

    Eid-ul-Fitr Mubarak

    PkRevenue.com wishes Happy Eid-ul-Fitr Mubarak to all valuable readers and followers.

  • PM reviews preparations for budget 2019/2020

    PM reviews preparations for budget 2019/2020

    ISLAMABAD: Prime Minister Imran Khan on Tuesday reviews preparations for budget 2019/2020.

    The prime minister chaired the preparatory meeting for budget 2019-20 wherein he was briefed in detail about the revenue and spendings.

    The federal budget scheduled to be announced on June 11, 2019 for fiscal year 2019/2020.

    The meeting was attended by Finance Advisor Abdul Hafeez Sheikh, Commerce Advisor Abdul Razak Dawood, Planning Minister Khusro Bakhtiar, State Minister for Revenue Hammad Azhar, Special Assistant to Prime Minister Dr Sania Nishtar, Chairman of Federal Board of Revenue Shabbar Zaidi and senior government officers, a Prime Minister Office statement said.

  • FBR acquires information of account holders having deposits Rs0.5 million from SBP

    FBR acquires information of account holders having deposits Rs0.5 million from SBP

    ISLAMABAD: Federal Board of Revenue (FBR) to acquire information of bank account holders having deposits above Rs0.5 million from the State Bank of Pakistan (SBP), sources said on Tuesday.

    The details of account holders would be obtained for the purpose of broadening of tax base.

    The exercise started after a letter was received by the FBR from the office of Prime Minister. Prime Minister Imran Khan expressed concerns over narrow taxation base, low tax-to-GDP ratio, systematic aberrations in the taxation system and has desired that concerted efforts should be put in to increase taxation base.

    In this regard Member Inland Revenue (Operation) issued directives to all the Chief Commissioners and Director General Broadening of Tax Base for taking following measures.

    01. Data of banks account holders above the threshold of Rs500,000 should be examined with the assistance of the State Bank of Pakistan (SBP).

    02. Data of all industrial and commercial power connections should be obtained from Distribution Companies (DISCOs) and meaningfully extrapolated to ensure filing of tax returns by all concerned.

    03. Information about all owner/tenants living in houses of two kanals or more should be obtained.

    04. Information about all persons owning luxury vehicles of 2400CC and above should be scrutinized objectively.

    Information about frequent foreign travelers should be analyzed.

    The tax offices have been directed that in addition to the above, existing base line data of all the above areas/indicators along with the targets set by field formations for the tax year 2019/2020 need to be shared by June 11, 2019 as directed by the prime minister.

    The prime minister will review the performance of FBR in the context of the broadening and widening tax base on monthly basis.

  • Low property values causing huge tax losses in Pakistan

    Low property values causing huge tax losses in Pakistan

    KARACHI: A large sum of tax revenue has been lost due to unrealistic declaration of property values at the time of transaction.

    The World Bank in its recent report on Pakistan pointed out significant size of exemptions and concessions granted by the country every year.

    “Substantial exemptions also apply to property taxes, whereby properties below a certain size are exempted regardless of location, while revenue is also lost due to unrealistically low valuations used for taxation purposes,” the World Bank said in its recent report on Pakistan Revenue Mobilization Project.

    The report pointed out that The Capital Gains Tax (CGT) returns negligible receipts due to the zero rate applied to capital gains from the sale of immovable property after more than four years of ownership, and rates of 5-10 percent for properties sold after one to four years of ownership.

    The World Bank said that the efforts of tax authorities to broaden the tax base would involve scaling back the extensive tax expenditure from exemptions.

    “Multiple exemptions and discounted rates to select industries, economic actors, and economic activities (e.g. sugar, textiles, and fertilizer industries; ‘associations’ in the real estate sector; imports for infrastructure projects under the China- Pakistan Economic Corridor) are granted in each year’s budget law, which distort competition and economic actors’ incentives.”

    The report said that in FY2017/18, Pakistan’s tax expenditure (i.e., tax revenue foregone due to exemptions and concessional rates) was estimated at 2 percent of GDP, primarily due to exemptions from General Sales Tax (GST) and customs duties.

  • SECP to facilitate startups under PM’s Kamyab Jawan Program

    SECP to facilitate startups under PM’s Kamyab Jawan Program

    ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has assured to provide all necessary measures for the nascent companies to be registered in communication, tourism and postal sectors under Startup Pakistan Programme of Prime Minister’s Kamyab Jawan Programme.

    This assurance was given by Farrukh Sabzwari, Chairman, SECP at a meeting with Muhammad Usman Dar, Special Assistant to the Prime Minister on Youth Affairs at a meeting on Monday.

    The meeting discussed preferential treatment for the registration of new startup companies through an online process under Prime Minister’s Kamyab Jawan Programme.

    It would not only promote entrepreneurship culture in the country but would also empower youth both socially and economically.

    Muhammad Usman Dar appreciated commitment of Security and Exchange Commission of Pakistan in facilitating and promoting business activities in the country for the creation of employment opportunities for the youth.

  • FBR advised to stop issuing revision in sales tax rates on petroleum products

    FBR advised to stop issuing revision in sales tax rates on petroleum products

    KARACHI: Federal Board of Revenue (FBR) has been advised to stop practice of issuing revision in sales tax on petroleum products on monthly basis.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020, presented suggestions regard powers to issue notifications for change in rate of sales tax – Section 3(2)(b) of Sales Tax Act, 1990.

    According to the present law the federal government may, by notification in the official Gazette, declare higher or lower rates of sales tax in respect of any taxable goods, provided that the bill for such change has been passed by the Majlis-e-Shoora.

    From 1 July 2016 to date, there have been around half a dozen notifications for changing the rates of sales tax on petroleum products.

    The rates have varied from zero percent to 36.5 percent during this period.

    The Supreme Court of Pakistan took a suo motu notice for a similar notification on June 21, 2013 and held that the federal government had no authority to levy and recover sales tax without getting the respective bill passed from the National Assembly.

    Given the Supreme Court’s verdict on the subject matter, questions arise as to whether the frequent changes in the rates of sales tax for petroleum products are maintainable under law.

    Moreover, so many changes on such frequent notice are in itself a challenge for industries which have to go through a lengthy systematic implementation process, each time such rates are notified.

    Therefore, the OICCI recommended that that changes in sales tax rates are legally vetted by the Parliament and this monthly practice of issuing notifications at the government’s behest is abolished.

  • FBR extends dates for payment, return filing of sales tax, federal excise

    FBR extends dates for payment, return filing of sales tax, federal excise

    ISLAMABAD: Federal Board of Revenue (FBR) has extended the last date for payment of duty and tax and filing of sales tax and federal excise returns for the month of May 2019.

    The FBR issued notification on Monday addressing all chief commissioners of Inland Revenue regarding extension in the date for submission of sales tax and federal excise return for the tax period of May 2019.

    The dates have been extended considering the Eid holidays which are falling on June 04 to June 07, 2019.

    The FBR extended the date of submission of Annexure-C and Annexure-I of the sales tax and federal excise return up to June 15, 2019, the date of payment of sales tax and federal excise duty up tot June 18, 2019 and the date of submission of sales tax and federal excise return up to June 21, 2019 for the tax period May 2019 due to Eid-ul-Fitr holidays.

    Earlier, tax practitioners requested the FBR to extend the dates.

    A letter has been sent on Friday to FBR Chairman Syed Muhammad Shabbar Zaidi for urgent consideration and for extension of time for e-filing of sales tax annexure ‘C’ and sales tax returns for the tax period May 2019.

    The Pakistan Tax Bar Association (PTBA) in its letter to FBR chairman informed that the last date for e-filing of sales tax annexure ‘C’ of sales tax returns and filing of sales tax return for the month May 2019 is June 10, 2019 and June 15, 2019, respectively. However, due to Eid Holidays due from June 04 to June 08, 2019, all the business houses will remain closed.

    The PTBA further said that the first word day after Eid and weekly holidays shall be June 10, 2019 which will be the last day of filing of Annexure “C”. Therefore it would not be practically possible to submit annexure “C” and Sales Tax Return in time.

    In view of above, the PTBA requested to extend the last date of e-filling of Sales Tax annexure “C” and e-filling of sales tax return up to June 18, 2019 for the tax period May 2019 to facilitate the taxpayers to fulfill their legal obligations properly.