Pkrevenue.com

Category: Budget 2021-2022

  • FBR urged to allow commercial import of used cars to end auto assemblers monopoly

    FBR urged to allow commercial import of used cars to end auto assemblers monopoly

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow commercial import of used and reconditioned cars of models up to five years old to end monopoly of local car assemblers.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 recommended the commercial import of used and reconditioned motor cars up to five years old.

    The chamber said that during the past 40 years, assemblers of automobiles have enjoyed protective duties, exemptions and virtual monopoly in Pakistan’s automobile car market.

    Contrary to initial agreements, the assemblers failed to implement deletion program up to 90 percent. Instead, they are importing CKD while they have created vendors who mostly import auto parts and supply to these assemblers.

    Consequently, the so called vendor industry is only producing low quality and non-mechanical parts which is clearly visible in locally assembled cars.

    So far the assemblers have only drained Pakistan’s foreign exchange reserves to the tune of billions of dollars.

    Quality of automobiles produced by the assemblers is so poor that not a single unit of these cars has ever been exported to any country.

    Despite such poor quality, artificial shortage is created to fetch a premium on the early delivery and allow undocumented investors to exploit genuine buyers.

    The chamber said that import of reconditioned cars more than 3 years old model has been restricted to favor the assemblers and exploit the middle class people of Pakistan who can no more afford to buy even a small 660cc to 1000cc imported or local car.

    Ironically, import of brand new cars of high capacity and premium brands is allowed which only benefits the elite. Middle class consumers have been deprived of their right to purchase reasonably priced used/reconditioned cars which have a better quality and safety standard than the locally assembled new vehicles.

    Clearly there is an element of corruption, connivance and vested interest involved in formulating auto-policies. Unfortunately, the vested interests are also resisting to change the policy to allow import of reconditioned cars by reducing the Tariff rates and also permit import of cars of up to five year old models.

    The chamber further said that enough protection has been given for decades to assemblers.

    The chamber has given a comprehensive tariff plan for import of used and reconditioned cars.

  • Bank account holders should file tax returns, wealth statements

    Bank account holders should file tax returns, wealth statements

    KARACHI: Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) should devise a framework to ensure all customers of financial institutions whose account show turnover above Rs2 million have filed tax returns and wealth statement.

    “This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts,” this was recommended by Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022.

    The chamber presented its proposals for broadening of tax base:

    FBR should simplify the tax structure of the country by implementing tax reforms recommendations already been submitted by various forums in the past, and also hold regular round table conferences with leading tax and legal experts to review existing laws for increasing the number of taxpayers and taxable entities.

    Tax authorities should use technology, data analytics including Artificial Intelligence tools and make better/effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “Filers”, with submission of annual income tax/wealth returns and wealth reconciliation statements. FBR and SBP to devise a framework to ensure all customers of financial institutions whose account shows turnover in excess of PKR two million or more during the year, have filed a tax return and wealth statement. This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts.

    Art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis. iv. Once the FBR receives the above information, it should be pro-active and pursue potential taxpayers by sending them income tax return forms requiring them to file tax returns – rather than waiting for the tax returns to be filed.

    Section 111(4) of ITO 2001, last amended in 2018, should be further reviewed to restrict tax free inward foreign remittances to immediate family members only.

    Eliminate culture of Amnesty Schemes as it discourages the honest taxpayers.

    Severe, and visible, penalties should be levied to punish tax evaders, starting with evasions of over PKR one million.

    As Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which became operational from September 2018, regular coordination should be done with relevant authorities of countries, considered as tax heavens for stashing away illegal wealth, for information sharing, and cases of proven tax evasion publicly shared.

    Appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any kind of assets outside the country for which source of income could not be established.

  • Revamping withholding tax regime with maximum five rates recommended

    Revamping withholding tax regime with maximum five rates recommended

    KARACHI: Federal Board of Revenue (FBR) has been urged to revamp withholding tax regime and bring down the existing 50 different tax rates to maximum five rates.

    Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors operating in Pakistan and multinational companies, in its proposals for budget 2021/2022 suggested the FBR to revamp the withholding tax regime, which is one of the key irritants for compliant taxpayers.

    It said that the fact that the ‘Collection and Deduction of Income Tax at Source (Withholding Agents Perspective) (Taxpayer’s Facilitation Guide)’ on the FBR website is of 48 pages highlights the complexity of the withholding tax regime which has more than 30 tax provisions that need to be followed and 50 different tax rates, applicable on nearly all heads of receipts/payments.

    The rate of withholding/advance tax also varies depending upon the nature of transaction, legal/tax status of the parties i.e., company or individual and active or in-active filer.

    Moreover, FBR system does not auto populate taxes withheld in the portal to the credit of the beneficiary.

    Furthermore, different categories of withholding tax (WHT) rates have been prescribed under the ITO 2001, for various types of payments and it has become extremely difficult for the person processing payments to be precise and accurate in applying WHT rates and ensure compliance:

    The complexity for the withholding agent has been further compounded after the introduction of active taxpayers list and different rates for an active and non-active filer.

    The OICCI recommended the following:

    i. Withholding tax regime should be revamped by reducing it to a maximum of five rates for all withholding taxes and the differentiation should be on the basis of active and inactive taxpayers only.

    ii. All taxes withheld should be auto populated in the portal to the credit of the beneficiary.

    iii. Final Taxation Regime should be eliminated, and all withholding taxes should be available for adjustment and the operations wing of FBR should ensure that all persons whose taxes have been deducted file their tax returns.

    iv. Withholding agents should be given incentive in the form of 2% tax credit of the amount collected for facilitating the Government.

    v. In addition to the above administrative/streamlining issues, withholding/ advance tax rates on below transactions should be reconsidered.

    a) Withholding tax rate be reduced to 0.25% for all distributors in line with the withholding taxes applicable on dealers and sub-dealers of fast-moving consumer goods.

    b) Withholding tax rates applicable on services is 8 percent minimum tax regardless of the actual taxable income of the service provider. The nature of this tax effectively becomes indirect tax and increases the cost of doing business for service providers, hence, tax on services should be made adjustable.

    vi. Withholding tax deduction u/s 153 (1)(a) which is currently considered as minimum tax for all the suppliers (except manufacturers and listed companies) should be made adjustable at least for corporates appearing in active taxpayers’ list.

  • FBR urged to provide option for business principal activity in sales tax registration

    FBR urged to provide option for business principal activity in sales tax registration

    The Karachi Chamber of Commerce and Industry (KCCI) has called upon the Federal Board of Revenue (FBR) to address challenges in the business registration process, emphasizing the need for streamlined options in the IRIS registration form.

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  • FTO proposes initiating criminal prosecution against smugglers

    FTO proposes initiating criminal prosecution against smugglers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended that tax authorities should initiate criminal prosecutions against persons involved in smuggling or selling non-duty paid goods.

    In its proposals for budget 2021/2022, the FTO recommended measures on the issues of smuggling, misdeclarations, under-invoicing and non-transparent auctions.

    In order to effectively check the smuggling, it was recommended that criminal prosecution should be initiated against the persons/owners of the showrooms involved in business of Non-Duty Paid (NDP) vehicles, fuel pumps of smuggled oil and storage godowns of other smuggled items, from whom the NDP goods were recovered as provided in the Customs Act, 1969 read with the Prevention of Smuggling Act, 1977.

    Installation of scanners on the ports was recommended to be given top priority. It was emphasized that if government invested herself in this project, it will raise the potential of higher revenue and more effective check on misdeclaration of description or quantity of imported goods.

    So far two scanners have been added at Karachi Ports in addition to one already installed there. Two scanners have also been installed at Jamrud and Torkham, Peshawar.

    It was recommended to provide a mechanism in law for cross-matching of value declared on export documents of exporting station to import documents at importing station.

    Federal Board of Revenue (FBR) was asked to prescribe Model Auction Rules for auction through electronic means and prepare/operationalize an auction module in the WeBOC system to bring transparency and efficiency in the auctions.

    According to FBR, under the WeBOC-Glo initiative (an enhanced version of WeBOC), an electronic auction module has been developed and deployed in the system. This module envisages online registration of bidders who can bid for all auctionable goods displayed on website by the Customs authorities. Pilot is being run at Karachi Port (South Asia Port Terminal only).

    In view of constant complaints about delayed clearance at the border stations, generators should be provided on priority for speedy passengers/goods clearances and maintenance of IT and infrastructure support.

  • FTO recommends disabling sales tax registration as soon application for de-registration received

    FTO recommends disabling sales tax registration as soon application for de-registration received

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended disabling sales tax registration as soon application received for de-registration.

    The FTO submitted proposals for budget 2021/2022, stating that in order to stop misuse of registration for issuing fake invoices, immediate disabling of the registration was proposed in electronic system as soon as the application for de-registration was received.

    Sales Tax Registration of commercial importers was proposed to be allowed only to Income Tax filers along with other necessary cautions (i.e. declaration of Pakistan Customs Tariff (PCT) headings of the products they trade in) to check bogus registration.

     Following budget proposals were also sent to FBR:

    • to provide for immediate disabling of the registration in electronic system, pending final de-registration, as soon as the application for de-registration was received;

    • to prescribe a list of documents/records to accompany the de-registration applications for the purpose of sub-rule (2) of rule 11; and

    • suitable amendment to be made in rule 12(a)(vii) so that the Commissioner shall issue the orders of revocation of suspension within two weeks from the last date prescribed for issuance of show cause notice.

  • FTO proposes simplification of income tax return forms

    FTO proposes simplification of income tax return forms

    ISLAMABAD: Federal Tax Ombudsman (FTO) has advised the Federal Board of Revenue (FBR) to simplify income tax return forms in consultation with stakeholders to facilitate the taxpayers.

    In its proposals for the budget 2021/2022, the FTO recommended simplification of returns forms in consultations with small taxpayers along with availability of option of filing the returns in Urdu.

    Similarly, an option to file the returns manually with facility provided by the FBR to upload on line data was also proposed.

    The FBR in response to the FTO stated that simplified Income Tax Returns for salaried, small traders having turnover up to Rs10 million, manufacturing Small & Medium Enterprises (SME’s) having turnover up to Rs50 million have been issued.

    It was recommended that FBR should devise some system so that sunset date of filing return is not extended but late filing may be allowed with certain incremental penalty for delay in filing per month or any part of it.

    The FBR responded that in 2020, last date of December 08 was not extended. According to FBR, Income Tax Return making rules have been issued. Though these are applicable for Tax Year 2022 but FBR is following this for Tax Year 2021 and return forms would be available by 1st July (to be submitted within due date without extension on last date).

    The FTO proposed that FBR may approach the concerned Authorities/Establishment Division, to issue instructions to bind the heads of government departments, autonomous bodies and large scale public sector organizations to get the certificate of filing of returns by their employees falling in the tax net at the end of the last date and to link their promotion/annual increments with mandatory return filing.

    Regarding audit, it was proposed to rationalize its parameters so that more focus should be laid on large entities rather than small taxpayers.

    Moreover audits should also include investigative work to detect the evasion through a study of input/output standards of utility bills and production capacity of machinery etc. Several cases for audit should in line with capacity of FBR to complete the audit in a year.

  • Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    KARACHI: Foreign investors operating in Pakistan have suggested the government to abolish Final Tax Regime (FTR) and make all provisions pertaining to withholding tax as adjustable.

    In its proposals for budget 2021/2022, the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday said it had submitted comprehensive taxation proposals for the Federal Budget 2021-2022 which highlight various measures required  to streamline the complex tax regime, incentivize the legitimate tax payer through Ease of Doing Business measures and ensure filing of tax returns by all income earners. 

    Commenting on the Taxation proposals , Irfan Siddiqui, OICCI President, acknowledged that the government has taken various bold measures in the face of many economic challenges, including those emanating from the Covid 19 impact on the local and international trade and business”.

    Irfan Siddiqui added:  “OICCI members are fully conscious that the continuing spread of Covid-19 poses exceptional challenges to the government and have therefore decided not to seek a number of taxation relief measures which, under normal circumstances, would have been justified to boost FDI and align Pakistan to compete with other regional countries.”

    OICCI has strongly recommended that the Minimum Tax regime should be rationalized with a lower level general tax rate and immediately reduced to 0.2 percent  for certain industries, like oil refining and oil marketing companies, with high turnover and low/government regulated  margins.

    “Moreover, Withholding tax regime (WHT) with over 45 rates is cumbersome and needs to be immediately rationalized to 5 rates for filers. Final Tax regime should be abolished and all withholding taxes should be made adjustable. FBR should ensure that all those persons who have been subjected to withholding taxes should file regular tax returns.”

    OICCI Secretary General , Abdul Aleem , giving further details of the key Taxation proposals from the chamber highlighted the need to introduce one unified Sales Tax rate of 13  percent, as applicable in Sindh, and one common tax return form throughout the country, filing of a single tax return with FBR instead of separate ST returns to the authorities in every province. He also stated Income Tax rebate of 2 percent for Shariah Compliance investment have not been effective and the intent of the regulators will not be realized until these are aligned with SECP Shariah regulations. 

    M. Abdul Aleem also stated that OICCI has recommended for substantial increase in FED on unmanufactured tobacco to arrest massive tax evasion in the tobacco industry. This together with introduction of Track and Trace Monitoring system will boost FBR revenue significantly. OICCI also proposed introducing stringent controls and penalties for illicit trade across the whole value chain. Pending review and revision of Afghan Transit Trade agreement (ATTA) , there is need to harmonize duty and tax rates to remove incentive for duty evasion. 

    Highlighting the need for Ease of Doing Business and promoting tax culture in the country , OICCI has recommended that the Tax regime should be simplified with massive reduction in the number of tax payments and filing of various forms/returns. Pending tax refunds should be settled withing 45 days and inter-adjustment of income/sales tax refunds be allowed in the law.

    In line with the latest focus in the country on digitization of the economy, FBR and associated tax authorities need to substantially upgrade their use of digital technology, data analytics, including Artificial Intelligence tools to effectively use a strong data base already available in the country from NADRA and other documented sources  so as to ensure that all income earners regularly comply with the tax requirements. 

    In conclusion, Abdul Aleem observed that OICCI members believe in the potential of Pakistan , despite challenges, which can be harnessed with positive and regular engagement of relevant authorities and private sector.

    There is need to continuously  improve and align policies and practices in Pakistan with the best in the region, to be able to attract sizeable FDI in the  manufacturing , IT and services export  and other job creating sectors.

  • FTO recommends restricting tax officials’ powers

    FTO recommends restricting tax officials’ powers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended restricting powers of tax officials in recovery of outstanding account through freezing bank account of taxpayers.

    The FTO in its proposals for budget 2021/2022 said that coercive recoveries through attachment of bank accounts without notice and subsequent delay in restoring the account, hits the taxpayers very hard.

    It was recommended that notices should be issued with bar code and time limit may be prescribed for ensuring the de-sealing of bank accounts of taxpayers/assesses after resolution of issue.

    Following measures were also suggested as budget proposals:

    • Restrict the use of power to attach bank accounts unless the case under litigation has been established at least in the first appellate stage;

    • Adherence to service of Bar-Coded notices to eliminate possibility of abrupt attachment of bank accounts for recoveries and hasty ex-parte decisions;

    • Shortest time limit may be prescribed in the statute to ensure de-sealing of bank accounts of taxpayers/assesses.

    According to FBR, it is mandatory not to issue Income

    Tax related notice without Bar Code. The mechanism of automatic stay of demand by paying 10 percent of demand also exists under all IR laws.

    However, FTO constantly receives complaints on coercive recoveries and issues appropriate Recommendations.

  • FBR urged to remove CNIC condition on sales up to Rs100,000 by distributors

    FBR urged to remove CNIC condition on sales up to Rs100,000 by distributors

    KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw condition of CNIC on supplies made by distributors to unregistered persons on sales up to Rs100,000.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 stated that under section 23(1)(b) of the Sales Tax Act, 1990 exclusion has been provided to retailers, whereby retailers supplying taxable goods to unregistered persons are not required to mention the CNIC unregistered customers, wherein the transaction value inclusive of sales tax does not exceed Rs.100,000.

    Due to the present provisions of the law, the distributors are facing a dilemma whereby small retailers are purchasing taxable goods valuing Rs.100,000 from mega stores (retailers) in order to avoid the requirement of providing the CNIC, resulting in loss of business for the Distributors who normally used to sell goods to such small retailers

    The KCCI proposed that FBR should extend similar exclusion of Rs.100,000 to distributors as well.

    Giving rationale, the KCCI said that it will help ease of doing business thereby resulting in enhancement of tax revenue.