KARACHI: Pakistan Business Council (PBC) has advocated abolishing anti-dumping duty on imported raw material that are used for export oriented units (EOU).
(more…)Category: Budget
This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.
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Hafeez Shaikh directs FBR to collect data for effective budget making
ISLAMABAD: Adviser to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh on Monday directed the Federal Board of Revenue (FBR) to collect data for effective budget making for year 2020/2021.
Dr. Hafeez Shaikh chaired a meeting at the Finance Division through video link with Dr. Ikram-ul-Haq to discuss proposals on improving the tax structure of the country with the help of effective data gathering and reconciliation mechanism.
He directed FBR to collect data through multiple sources that may be best used for effective budget making exercise.
Chairman FBR, Secretary Finance and ex-secretary Finance Dr. Waqar Massoud Khan were also present during the meeting.
The adviser appreciated the work done by Dr. Ikramul- Haq for gathering data across the country from selected markets and from different chambers of commerce and Industry.
Dr. Ikram shared with the adviser the important inferences from data gathering exercise and suggested certain techniques for data reconciliation that could improve tax collection in a more effective manner.
The adviser said that the basic purpose of this exercise is to consult experts to seek suggestions and insights so that the fundamental problems of the tax collection system in the country could be effectively addressed.
He said that as we are preparing the next budget, we should be more vigilant, practical and analyze the opportunities and challenges offered by the current environment.
The Government is ready to listen to all stakeholders to prepare a budget which is according to the need of the prevailing economic circumstances and innovative in providing solutions to the structural problems of the economy.
He asked the Expert to firm up his proposals in concise and doable manner and share the draft as early as possible with the ministry so that these proposals could be well incorporated in the upcoming budget.
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FBR proposed to ensure CPR for deposited withholding tax
KARACHI: Federal Board of Revenue (FBR) has been advised to ensure Computerized Payment Receipt (CPR) for deposited withholding tax in order to avert chances of revenue leakages.
Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, said that presently the taxpayer has to deposit the withholding tax deducted fortnightly, i.e. within seven days from the end of each week ending on every Sunday.
In addition, certain WHT agent do not deposit on time and some agents do not deposit at all. This also includes agencies/govt. organizations in respect of withholding tax, where CPR is not provided hence revenue leakages to government in the absence of withholding tax deposit.
On the other hand, where withholding tax is deducted by agencies/government organization, but do not provide system (IRIS) generated CPR as they do not enter in the system. Therefore assesse cannot get input benefit due to non-availability of CPR from IRIS system on account of withholding tax in spite of reminders.
The PBC recommended that timeline of 7 to 13 days should be extended to one week after the month.
Besides, IRIS system should be applicable for all with holding agent including agencies/government organizations and CPR in respect of withholding tax facing authority should be available from IRIS.
This will help in ease of doing business and facilitate withholding tax agents.
Furhter, the proposed amendment will help in controling revenue leakages as well as assesse can claim input tax properly.
Thus neither it is loss to authority nor the assesse. In the absence of non-availability of CPR , this is an extra cost for doing business.
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FBR advised to amend withholding tax on prize winnings
KARACHI: Federal Board of Revenue (FBR) has been advised to amend the income tax law related to withholding tax deduction on prize winnings.
Pakistan Business Council (PBC) in its budget proposals for 2020/2021 submitted to the FBR said that under Section 156 of the Income Tax Ordinance, 2001 requires a company to deduct 20 percent tax on “prize offered by companies for promotion of sale”.
The PBC suggested amended in the Section 156 that every person paying prize of prize bonds, or winning from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale to end consumers, or cross-word puzzle shall deduct tax.
The PBC said that the clear intention of this section is to capture tax through withholding at source from persons who are recipients of these prizes or winnings; the intention is not to tax any person who belongs to the supply chain of the companies who offer prize for promotion of sales.
The income of the supply chain i.e. dealers, distributors is subjected to withholding tax in the shape of withholding taxes imposed under separate withholding regimes.
It is therefore suggested that to clear any ambiguity in law regarding application of this section, it may be amended to add the term “end consumers” to oust any person in the supply chain from the ambit of this section.
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Corporate, super tax rates should be aligned for banks
KARACHI: Federal Board of Revenue (FBR) has been proposed to bring down the corporate tax rate for banks at par with other corporate sector and also treatment of super tax for banking companies aligned with other taxpayers.
The banks are paying 35 percent income tax whereas the corporate tax rate for other sectors is 29 percent. Likewise, super tax at four percent is applicable on banks.
Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for 2020/2021 submitted to the FBR, highlighted that the banking sector tax rates are not aligned with the general corporate tax rates.
Furthermore, through Finance Supplementary (Second Amendment) Bill 2019, Super Tax at 4 percent is made applicable on banks from tax year 2018 to tax year 2021.
The OICCI recommended that corporate tax rates for the banking sector should be aligned with other sectors.
Meanwhile, super tax relief, as granted to other industries, should be given to banking sector as well.
The OICCI also highlighted tax deduction on profit on debt under section 151 of Income Tax Ordinance, 2001.
Through Circular No.1/2-STB/2019 dated 26th July 2019, FBR has clarified that withholding tax under section 151 shall be deducted on the basis of cumulative profit paid in a tax year.
The circular is in contradiction with the Act, which requires that withholding tax shall be deducted on payment basis.
The circular should be withdrawn, to avoid litigation between banks and department.
There should be a uniform withholding tax rate of 15 percent for all payments of profit on debt.
The OICCI pointed out Section 165 and 165A of Income Tax Ordinance 2001related to submission of statements and information by the banks.
The Clause (81A) of Part IV to the Second Schedule was inserted vide the Finance (Second Amendment) Act 2019 to exclude the reporting requirements under section 165 of Income Tax Ordinance, 2001 with respect to withholding tax under section 151 (Profit on Debt) and 231A (Cash Withdrawal) since both the withholding sections are required to be reported under section 165A.
The clause was abolished vide Finance Act 2019, resulting in duplication of reporting i.e. withholding tax under section 151 and 231A has to be reported, with a threshold, under section 165A on monthly basis and again under section 165 on bi-annual basis, but without any threshold i.e., withholding tax of even Re 1 has to be reported under section 165A.
Therefore, the OICCI recommended that Clause (81A) of Part IV to the Second Schedule should be restored to avoid duplication of reporting and handling of voluminous data for immaterial withholding tax transactions, which is not clear.
Alternatively, reporting requirement of section 165A for both these sections (151 and 231A) should be deleted to avoid double reporting.
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Tax authorities consider reducing minimum tax rate: Zeeshan Merchant
KARACHI: Tax authorities have agreed to consider reducing minimum tax rate for corporate sector and individuals in the upcoming budget, especially in the wake of financial losses due to coronavirus pandemic, a senior tax consultant said.
“In different meetings with Dr. Abdul Hafeez Shaikh, Finance Advisor to Prime Minister, Razak Dawood, Commerce Advisor to PM and senior officers of Federal Board of Revenue (FBR) have agreed to reduce minimum tax rate for providing relief to mitigate adverse impact of coronavirus,” Zeeshan Merchant, former vice president of Karachi Tax Bar Association (KTBA) said this while talking to PkRevenue.com.
Merchant, who is also honorary consultant to Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said that the actual proposal for the budget 2020/2021 is to reduce minimum tax rate for corporate sector to 0.5 percent and abolish this tax for two years in case of individuals and Association of Persons (AOPs).
He said that in meetings Dr. Abdul Hafeez Shaikh and Abdul Razak Dawood appreciated the proposals and promised to consider in the budget for providing maximum relief to businesses.
Merchant further said that the FBR chairperson also pledged to move this proposals after consideration for incorporation in the Finance Bill 2020.
He said that due to coronavirus and subsequent lockdown many corporate entities would not able to post significant profits or declare substantial losses for the year.
Merchant further said that the minimum tax applied on turnover when a taxpayer declare lower profit or declare gross losses to the year.
The FPCCI in its proposals for fiscal year 2020/2021 said that the existing rate of 1.5 percent minimum tax is very high and results in financial hardships to the taxpayers.
Due to the current economic conditions and its negative impact on productivity, the businesses are not operating at optimum level.
According to changes vide Finance Act, 2016 threshold of turnover for individual and AOP for turnover tax at the rate of 1.25 percent decreased from Rs50 million to Rs10 million. This had adversely affected the true declaration of turnover and has created hardship for the taxpayers.
After changes made in Section 113(1) of Income Tax Ordinance, 2001, now companies have to pay turnover tax even in case of gross loss before charging of depreciation. This has adversely affected the industry.
Under section 113(2) (C) where Minimum Tax paid under sub section (1) exceeds the actual tax payable under Part I, Clause (1) of Division I, or Division II of the first Schedule, the excess amount is carried forward for adjustment against tax liability of the subsequent tax year(s).
The FPCCI also proposed to reduce the minimum tax rate and enhance the limit of turnover to Rs50 million.
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Time limit for customs valuation issuance should be fixed
KARACHI: Federal Board of Revenue (FBR) has been recommended to fix time limit for issuance of customs valuation.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, said that the validity of Valuation Ruling under Section, 25-A of the Customs Act, 1969 is life time utill or unless revised or rescinded by the competent authority and Genuine Importer suffer as the Assessing Offices reject the transaction Values and Increase the Values of Assessments.
Time limit may be fixed for issuance of Valuation Ruling under subsection 1 of section 25A of Custom Act, 1969, may not be more than 30 days and validity period under subsection 4 of section 25A of the Act should not be more than 90 or 120 days as we have fast internet system in the world over.
(i) The following proviso may be inserted after subsection 1 of section 25A of the ACT,1969.
“Provided that the time limit to notify the customs values under subsection 1 of section 25A should not me more than 30 days from date of first initiative of the subject exercise”.
(ii) The words after the “applicable” in subsection 4 of section 25A should be substituted as; “till ninety days from the date of issuance of determined customs values.”
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FBR advised to make annexure-J mandatory to prevent under reporting
KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the filing annexure-J along with monthly sales tax returns in order to remove disparity between formal and informal sectors.
Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, said that currently only certain persons as defined under Rule 14 to Sales Tax Rules, 2002 are required to file annexure J.
Annexure J requires taxpayers to file details of stock in hand in terms of value as well as quantity.
Other taxpayers are encouraged to file the same but there is no mandatory requirement as per applicable laws to file the same.
“It is feared that registered taxpayers are under reporting or suppressing their actual sales to escape the sales tax charge as currently there is no mechanism to report the details of stock (Raw material, WIP, and Finished Goods).
The PBC proposed to make it mandatory for all the taxpayers to file Annexure J along with their monthly sales tax return in order to ensure that sales are not suppressed or made without charging proper sales tax.
It said that the proposed mandatory requirement would help in removing disparity between formal and informal sectors.
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FBR urged to clarify income tax relief to group companies
KARACHI: Federal Board of Revenue (FBR) has been urged to clarify group relief under income tax laws regarding a holding company can purchase losses of its subsidiary.
Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, stated that as per Section 59B of the Income Tax Ordinance, 2001, a holding company can purchase the loss of its subsidiary provided there is continued ownership of five years as mentioned in sub-section 2 of Section 59B.
The PBC said that this subsection 2 of Section 59B has already been misinterpreted by the tax department in various companies that purchase of loss by the holding company is allowed in the sixth year i.e. after the end of continued ownership of five years.
“Practically speaking, subsidiary companies mostly incur losses in the initial years of establishment due to huge amount of depreciation / initial allowance on new setup (plant & machinery, etc.) and mostly no losses incurred after a period of 5 years (i.e. in the sixth year).”
Taking the approach used by the tax authorities, practically speaking, none of the holding company would be able to claim losses of its subsidiary.
Therefore, the PBC suggested following amendment to Income Tax Ordinance:
At the end of sub-section 2 of Section 59B, an explanation be added as below:
“Explanation: For the removal of doubt, it is clarified that the holding company can adjust the losses of its subsidiary during the aforesaid period of 5 years.”
The PBC said that the propose amendment would promote consolidation of businesses.
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FPCCI recommends audit exemption for commercial importers
KARACHI – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called on the government to reinstate audit immunity for commercial importers in the upcoming federal budget 2020–2021.
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