KARACHI: Pakistan Business Council (PBC) has suggested the Federal Board of Revenue (FBR) to lower the corporate tax rates, especially for listed companies.

The PBC in its proposals for budget 2022/2023 recommended reduction in corporate tax rate to 20 per cent.

READ MORE: Tax cut suggested on dividend paid by exempt entities

The council in its proposals for reducing the cost of doing business in Pakistan, said all companies except banking companies and companies defined in section 2 of Income Tax Ordinance, 2001 are subject to be taxed at 29 per cent on taxable income

It recommended that the rate of income tax on companies should be gradually reduced to 20 per cent to align with the taxation rate of other countries in the region.

READ MORE: PBC suggests reducing further tax to stop flying invoices

Listed companies should be given the first benefit of the lower taxation rates as compared to other companies to further encourage transparency and documentation.

The PBC said that through section 113C of Income Tax Ordinance, 2001 Alternate Corporate Tax (ACT) was imposed on companies at the rate of 17 per cent on accounting profits.

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It recommended that Section 113C should be abolished as there is already minimum tax on goods and services

The council further said that currently under Section 154(3B) of the Ordinance, every direct exporter and an export house registered under the Duty and Tax Remission for Exports Rules, 2001 provided in Sub -Chapter 7 of Chapter XII of the Customs Rules, 2001 shall, at the time of making payment for a firm contract to an indirect exporter shall deduct tax at 1 per cent of the payment made.

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“This 1 per cent tax deduction shall be considered as final tax on the income of the indirect exporter. This clause should be extended to all exporters under various schemes like EFS, EOU etc. to remove differential treatment under various export schemes,” it recommended.

The Commissioner has been empowered to modify the withholding tax recovery order, companies would thus be required to maintain records and details for an indefinite period of time. Failure to provide such records could be used as a tool by the tax authorities to create undue tax demands in order to achieve their revenue targets.

READ MORE: FBR urged to make Google pin location must for retailers

Sub-section (3) of Section 161 should be omitted for avoiding record retention for unlimited period. The limitation of time be provided under the law for initiating and concluding the monitoring of withholding tax proceedings, like those for non-monitoring proceedings which is also important for harmonization.

Section 15A(1)(h) of Income Tax Ordinance 2001. As per Finance Act 2020, deductibility of administrative collection charges has been restricted to 4 per cent of revenue as compared to 6 per cent previously.

Renting of property is also a business and various administrative and collection charges are incurred which normally exceed even the 6 per cent threshold.

The allowable threshold should be allowed on actual basis as is the case in other sources of income or at the very least be restored to 6 per cent of gross rental revenue

KARACHI: Federal Board of Revenue (FBR) has been urged to reduce rate of income tax on dividend from exempt entities as the higher rate of dividend effectively withdraws the benefit of exemption.

Pakistan Business Council (PBC) in its proposals for budget 2022/2023 submitted to the FBR, urged to reduce the dividend tax to 15 per cent on dividend received from exempt entities.

READ MORE: PBC suggests reducing further tax to stop flying invoices

It said that tax of 25 per cent on dividends from exempt entities introduced via Finance Act 2019 (Division III of Part I of First Schedule) of the Income Tax Ordinance, 2001.

Through Finance Act 2019, rates of dividend taxation have been increased from 15 per cent to 25 per cent on dividends paid by entities whose income is exempt under the Income Tax Ordinance 2001.

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The higher rate of dividend in such cases effectively withdraws the benefit of exemption or concession intended to be provided e.g., if Government intends to provide concession to SEZ than while providing corporate tax exemption at one end, higher tax incidence on its dividend reduces the benefit at other end.

Exemptions are associated with some economic objective and higher dividend rate will discourage such economic objectives, the PBC said.

READ MORE: FBR urged to massively reduce tax rates for return filers

It recommended that Clause (a) of Division III of Part I of First Schedule of Income Tax Ordinance, 2001 as applicable before Finance Act 2019, should be reinstated, to apply the rate of 15 per cent on dividend received from exempt entities.

Similarly, amendment be made for the withholding tax rates specified in clause (a) of Division I of Part III of the First Schedule, by reinstating the position prior to Finance Act 2019.

READ MORE: FBR urged to make Google pin location must for retailers

Earlier, the PBC recommended to reduce the further sales tax to one per cent in order to discourage flying invoices. The PBC said that at present, general rate of sales tax is 17 per cent and another 3 per cent further tax is also applicable incase supplies are made to unregistered persons.

The council said that further tax at 3 per cent incentivizes issuance of flying invoices by unscrupulous persons. In order to discourage issuance of flying invoices and to encourage proper reporting of sales, rate of further tax should be reduced down to 1 per cent or to maximum 1.5 per cent.

The PBC made this recommendation to document the economy and providing a level playing field for the formal sector.

READ MORE: FBR’s database mining suggested for new taxpayers

KARACHI: Pakistan Business Council (PBC) has recommended to reduce the further sales tax to one per cent in order to discourage flying invoices.

The PBC in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) recommended reduction in further tax to address the issue of flying invoices.

READ MORE: Commercial importers misusing tax registration

The PBC said that at present, general rate of sales tax is 17 per cent and another 3 per cent further tax is also applicable incase supplies are made to unregistered persons.

The council said that further tax at 3 per cent incentivizes issuance of flying invoices by unscrupulous persons. In order to discourage issuance of flying invoices and to encourage proper reporting of sales, rate of further tax should be reduced down to 1 per cent or to maximum 1.5 per cent.

READ MORE: FBR urged to massively reduce tax rates for return filers

The PBC made this recommendation to document the economy and providing a level playing field for the formal sector.

Earlier, the PBC suggested measures for preventing misuse of POS by importers who use fake registration profile of retailer.

In order to avail / misuse reduced rate of sales tax at 12 per cent on supplies of textile (which is available on supply of finished textile article through integrated POS system for retail outlets), some unscrupulous persons, after importing raw materials get tolling bills issued in their name from other manufacturers.

READ MORE: FBR urged to make Google pin location must for retailers

Thereafter, such imported raw material is being sold as finished textile article through POS integrated with FBR system to avail reduced sales tax rate of 12 per cent.

FBR, view notification dated January 4, 2022 has already clarified that bulk supply through POS is tantamount to be treated as wholesale and hence would be chargeable to standard rate of 17 per cent sales tax.

READ MORE: FBR’s database mining suggested for new taxpayers

To prevent this unscrupulous practice, the following should be made mandatory for entities whose imports are over 70 per cent of their output and who have a POS facility:

a) Should declare the number of their retail shops and

b) Provide the square ft. retail space, detailed address, and Google pin location of all the retail stores

c) Report per shop per month sales volume and invoices along with the monthly sales tax return.