Pkrevenue.com

Category: Budget

This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.

  • FBR proposed to review regulatory duty regime to promote domestic industry

    FBR proposed to review regulatory duty regime to promote domestic industry

    KARACHI: Business community has urged the Federal Board of Revenue (FBR) to review existing regulatory duty regime in order to promote domestic industry.

    Pakistan Business Council (PBC) in its budget proposals 2020/2021 advised the FBR to review of the regulatory duty where domestic industry can expand and market its capacity to the export markets.

    The PBC supports the government’s resolve to simplify, reduce and introduce cascading tariffs to promote industry.

    However, at a time of global recession when many overseas producers will be looking to find markets, we urge the government to factor this into its tariff review to protect jobs in Pakistan.

    Unless there is very strong anomaly, we recommend that present tariffs be maintained in order to preserve scale and competitiveness of domestic industry.

    Moreover, the DTRE scheme should be simplified for SMEs to avail.

    The PBC strongly advocates that the Finance Bill 2020 has a bias in favor of the manufacturing sector as a recovery in the manufacturing sector will have a multiplier effect of the economy.

    The PBC continues to advocate that taxation needs to be based on the principle of “all income irrespective of source should be taxed & all taxpayers must file tax returns”.

    The PBC and its members also firmly believe that the fiscal space that the government is looking for to implement its ambitious socio-economic agenda will not, and cannot be provided by continuing to increase taxation on the already taxed sectors of the economy.

    The taxation base needs to be widened through better documentation by bringing the under taxed, and the currently exempt sectors in the tax net.

    The current tax policies are leading to a reduction in investable surpluses for the corporate sector. The short-term revenue enhancement measures pursued by FBR in the recent past have acted as a disincentive to not only re-investments by existing units but have also acted as a deterrent to fresh investments in industry and the formal sector.

    Last year, the PBC welcomed the government’s policy announcement to separate tax policy and tax administration, it is however disappointed with the pace of implementation of this decision and urges the government to move on this front to create taxpayer confidence in the tax machinery.

    The laws on Group Taxation & Group Relief and the Alternate Corporate Tax (ACT) need to be addressed to create an investor friendly environment in the country.

    The arbitrary & non-transparent implementation of tax laws by FBR functionaries in their zeal to achieve unrealistic revenue targets is severely impacting the viability of the formal sector.

    The continued failure of the FBR to use data-mining to identify those who are either not paying or underpaying their dues is also an area of concern for the formal sector.

    There is blatant misuse of the Afghan Transit Trade continues, wholesale and retail markets all over Pakistan are flooded with smuggled products, however despite having the jurisdiction to act against the open sale of smuggled products, the FBR continues to hide behind such flimsy excuses like “lack of support from local administration.”

    The revenue leakages in the Customs department need to be plugged, Electronic Data Interchange (EDI) with China needs to be fully implemented.

    The Afghan Transit Trade needs to be better monitored, one measure could be the collection of all dues which are payable by importers in Pakistan and refunding the same once the shipment has conclusively entered Afghanistan.

    The PBC appreciates that the government managing the economy under an IMF program and at the same time managing the expectations of a nation reeling under the impact of the COVID-19 pandemic does not have the fiscal space to provide major incentives, however, it also believes that it is the government itself which through its policies can create the space that it requires to implement its social agenda.

  • Revival of sales tax zero rating suggested to ease liquidity problem

    Revival of sales tax zero rating suggested to ease liquidity problem

    KARACHI: Business community has recommended revival of zero rated sales tax for the export sector in the wake of difficulties faced following COVID-19.

    Pakistan Business Council (PBC) has suggested sales tax proposals for budget 2020/2021 to ease the pressure on the industry.

    It said that the proposal for bringing the five export sectors under the ambit of normal sales tax regime has clearly not worked.

    Sales tax refund claims continue to accumulate with the FBR while export industries have faced massive liquidity in the past nine months on account of this move.

    Exporters liquidity as well as net operating results / losses have taken a strong negative hit from the two-edged sword; once after withdrawal of zero rating regime resulting in piling of sales tax refunds and thereafter, due to cancellation of existing orders post the COVID-19 pandemic.

    Restoration of Zero rating will allow some relief on the liquidity front for the major export sectors

    It further said that at present, local sales to DTRE license holder has been provided the benefit of sales tax zero rating, however, local supplies to EOUs / manufacturing bond is chargeable to sales tax at 17 percent, which is an apparent anomaly between the DTRE, EOUs and Manufacturing bond rules.

    In order to remove anomaly and considering the fact that material / goods being purchased by DTRE / EOU / Manufacturing Bond are used for the purposes of exports and are subject to strict scrutiny, it is proposed to allow zero rating on local purchase of goods by EOUs / Manufacturing Bond in line with the benefit given to DTRE.

    Under the Sales Tax Act, Section 8 – B, a company is not allowed to adjust input tax in excess of 90 percent of the output tax for that period. Further, commercial importers paying 3 percent minimum Value Addition sales tax at import stage are totally exempt from the applicability of minimum tax under section 8B.

    All manufacturers be allowed 100 percent adjustment of input tax instead of the current restriction of 90 percent

  • Minimum tax collection should be suspended for two years

    Minimum tax collection should be suspended for two years

    KARACHI: Pakistan Business Council (PBC) has recommended suspending minimum tax under Section 113 of Income Tax Ordinance, 2001 considering the pandemic of COVID-19 and its impact on businesses.

    The PBC in its budget proposals 2020/2021, said that a turnover based minimum tax is fundamentally flawed in that it fails to take account of the industry specific margins and acts as a barrier to entry of new players.

    A minimum tax at 1.5 percent of sales for manufacturers (and higher rates for the services industry), under the present depressed business conditions will put an unbearable burden on businesses.

    “Pending a review of the continued justification of minimum tax, under the current business circumstances, we recommend that its collection be suspended for at least the next two financial years.”

    The PBC further said that as per Section 61 of the Income Tax Ordinance, 2001, persons falling under the Minimum Tax Regime / Alternative Corporate Tax are not able to claim any sort of tax credit on donations.

    Considering the situation of last quarter ending June 2020 due to COVID, many companies would fall under the minimum tax regime due to reduced product demand and margin issues.

    Section 61 of the Income Tax Ordinance, 2001 be amended to allow direct deduction of donations paid by any person to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 or any other Fund established by any Provincial Government or to any other approved Non-Profit Organization subject to the condition that the said donation should be made through crossed cheque.

    Moreover, in case of donation in kind, deduction against minimum turnover tax be allowed on the basis of valuation prescribed under Rule 228(4) of the Income Tax Rules, 2002.

    At present, rate of tax deduction on export proceeds is 1.0 percent.

    In order to promote sustainability of industries engaged in exports, rate of tax on export proceeds should be reduced to 0.5 percent from 1.0 percent for the next two financial years.

    In order to get exemption certificate against tax deduction under sections 153 [supply of goods] and 148 [import on goods], taxpayers are required to pay advance tax

    Taxpayers should be allowed unconditional exemption from tax deduction on import and supply stage without heavy upfront payment of advance tax liability. In order to ensure regular inflows to the Government, taxpayers be made liable to discharge at least 70 percent [as against present 90 percent condition] of total estimated annual tax liability in 4 quarterly instalments.

  • Introduction of registered savings, investment accounts proposed

    Introduction of registered savings, investment accounts proposed

    KARACHI: Pakistan Stock Exchange (PSX) has proposed introduction of registered savings and investment accounts (RSIAs) in the upcoming budget 2020/2021.

    In its budget proposals for the fiscal year 2020/2021, the PSX said that saving and investment are crucial for playing an important role in the process of socio-economic development through capital accumulations.

    Pakistan, besides facing problems such as unemployment, rapid growth of population, slow economic growth in the country, has a saving rate that is meager and undesirable for sustainable national economic development. Low level of saving rates in any economy have been cited as one of the most serious constraints to sustainable economic growth.

    Higher savings and the related increase in capital formation can be result in a permanent increase in economic growth rates.

    Registered savings and investments accounts (RSIAs) are personal accounts that allow investors to accumulate savings (e.g., Individual Retirement Accounts and Roth IRAs in the US, Registered Retirement Savings Plans and Tax Free Savings Accounts in Canada).

    Other variations on the theme promote saving toward other goals like children’s education (Registered Retirement Saving Plans in Canada) or funding future needs of a disable individual (Registered Disability Savings Plan in Canada).

    Although their design varies according to the schemes objective, they all have 2 features in common:

    — Capital accumulates free of tax (on interest, dividend or capital gains) as long as it stays in the account;

    — Eligible investments in the account are listed stocks and ETFs, tradable bonds and mutual funds

    In the United States, Roth Individual Retirement Arrangement (Roth IRA) is similar to TFSA. The Roth IRA was established by the Taxpayer Relief Act of 1997.

    The total contribution allowed per year to all IRAs is the lesser of one’s taxable compensation. The Packwood-Roth plan would have allowed individuals to invest up to $2,000 in an account with no immediate tax deductions, but the earnings could later be withdrawn tax-free at retirement.

    Therefore, it is proposed that the Government of Pakistan introduce a mechanism and regulatory structure for the launch of registered savings and investment accounts (RSIAs) to help channel savings towards productive investments.

    RSIAs will help bring capital from the large undocumented sector into the formal economy. Further, it is also crucial that firm guarantees be offered that contributions be subject to full amnesty-aside from AML and Terrorist Financing issues due diligence.

    Where they have been introduced, registered savings and investment account (RSIAs) have been very successful in channeling savings to productive investments through capital markets and often constitute the main source of income in retirement. In Pakistan, they will bring the added benefit of driving the government’s goal to document the informal sector.

    RSIAs could become one of the driving forces in the transformation of Pakistan’s economy. By some estimates, 40 million middle-class Pakistanis have an average accumulated wealth of over USD 10,000, for a total of over Rs. 50 trillion. Much of that wealth is currently invested in real estate, gold and other asset classes in Pakistan offshore. If RSIAs can capture 10% o that wealth, It would be equivalent to more than half the current market capitalization of PSX listed companies or more than the outstanding amount of PIBs and Sukuks.

    Appropriate amendment to be made in the Income Tax Ordinance, 2001.

  • PSX proposes abolishing capital gains tax for two years

    PSX proposes abolishing capital gains tax for two years

    KARACHI: Pakistan Stock Exchange (PSX) has demanded eliminating Capital Gains Tax (CGT) for up to next two years in order to attract more foreign investment.

    The PSX in its tax proposals for budget 2020/2021 suggested the Federal Board of Revenue (FBR) to eliminate / reduce CGT for next 24 months or at a minimum align rates of capital gains tax on disposal of securities with other regional exchanges and OECD countries of the world.

    The PSX said that currently, carry forward of losses is only allowed up to a period of three years and that last year CGT collection was merely Rs1.3 billion. Moreover, with the falling market, tax collection will not be worthwhile at all.

    “Therefore, it is suggested that CGT should be eliminated for next 12-24 months.”

    This will be a big headline change, with no revenue impact, and will encourage new domestic and international investors to come into the market.

    The PSX made following proposals related to CGT:

    i. To eliminate CGT for next 12-24 months, if that is not possible then;

    ii. Since the current rate of 15 percent is very high and that too is without any benefit of holding period, therefore it is proposed to reduce this rate in line with other regional and OECD countries such as Bahrain, Hong Kong, India, Malaysia, Mauritius, Qatar, UAE, New Zealand, Hungary, Norway etc. where there is no or very low capital gain tax as compared to Pakistan.

    iii. when CGT was first introduced in the year 2011, to encourage and attract long term investment, the tax rate was:

    Less than six months: 10 percent

    More than six months but less than 12 months: 7.5 percent

    More than one year: zero percent.

    The PSX proposed rates at:

    Holding period up to twelve months: 10 percent

    Holding period more than twelve months: zero percent.

  • Tax relief package to mitigate COVID-19 shocks under consideration, FBR tells KCCI

    Tax relief package to mitigate COVID-19 shocks under consideration, FBR tells KCCI

    KARACHI: A top official of Federal Board of Revenue (FBR) has informed the office bearers of Karachi Chamber of Commerce and Industry (KCCI) that a tax relief package for business community was under consideration in order to dilute the adverse impact of coronavirus pandemic (COVID-19).

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  • Why non-filers happy in paying high withholding tax rates, FPCCI asks FBR

    Why non-filers happy in paying high withholding tax rates, FPCCI asks FBR

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concerns over lower number of return filers and asked Federal Board of Revenue (FBR) to identify reasons that why non-filers happy in paying higher rate of withholding tax.

    According to a statement on Thursday, the FPCCI has finalize proposals for upcoming budget 2020/2021.

    The proposals have been drafted keeping in view of the objectives of (i) Revamping Taxation System (ii) Documentation of Economy (iii) Employment generation through Industrialization (iv) Promoting a responsive and equitable Taxation System (v) Infrastructure Development (vi) Trickledown effect of the fiscal space to the grass root level etc., and would be submitted to the concerned quarters within fortnight”.

    This was stated by Mian Anjum Nisar, President, FPCCI and Zakaria Usman, Convener of the FPCCI Budget Advisory Council.

    Elaborating the methodology of the budget proposals exercise, they stated that the FPCCI with a consistent commitment to developing and promoting a modern, responsive and equitable taxation system, has formulated these proposals on the basis of impartial, unbiased and transparent manner after taking a painstaking lengthy process which involved incorporating feedback received on matters related to revenue and taxation throughout the year from our members located across the country and input obtained from our member trade bodies, stakeholders, tax practitioners, knowledgeable people etc., through invitation of proposals, organizing workshops and holding a series of Budget Advisory Council meetings wherein these proposals were discussed in detail and some contradictory proposals were re-examined and final proposals were redesigned in line with the best interest of the country.   

    They informed that the FPCCI Budgetary document consists of three Volumes – Vol-I discusses issues / solution of macroeconomic nature ; Vol-II contains policy issues relevant to Taxation (Sales Tax, FED, Income Tax and Customs) ; while Vol-III contains Industry Specific Proposals received from FPCCI members .

    Moreover, the FPCCI would also submit its proposals to meet the challenges being faced by the trade & industry due to outbreak of COVID-19 as its severe and adverse impacts on various aspects of Pakistan’s economy is quite discern which may lead to negative growth rate, deterioration in current and fiscal balance, disruption in supply chain, increased unemployment etc.

    The FPCCI Chief Mian Anjum Nisar added, “The Macro Economic proposals contains long term action plan to boost exports ; promotion of Branding ; Enhancing SMEs sector ; Monetary Policy ; Creating Employment Opportunities through industrialization ; Taxpayers Bill of Rights ; Independent Tax Judicial System etc”.

    Zakaria Usman, Convener of the Budget Advisory Council disclosed, “In Direct Taxes, it has proposed to the Federal Board of Revenue (FBR) to reduce the tax rates to help increase competitive edge of indigenous products in both local and global markets; broadening of tax base; curtail parallel economy etc., as high tax rates provide incentives for tax evasion and corruption and results in high cost of doing business.

    At present the total numbers of NTN holders in Pakistan are over 4 million, however, the FBR has miserably failed to obtain return of income from such NTN holders and increase the number of active taxpayer during the last decade.

    They added that according to a study, 2.1 million Pakistanis (individuals) filed income tax returns in 2006-07 which shows that FBR during the last 14 years could not fetch much tax filers, despite prescribing higher withholding tax rates for non-filers”.

     “This underscores the need that FBR should conduct a study to find out what has gone wrong that even after penalizing the non-filers, they are happy to pay more by way of advance tax instead of filing returns”.

    He proposed that it is desirable that measures should be taken to facilitate to those, who are already existing taxpayers and contributing in the national tax pool in all manners, so that they become goodwill ambassador for FBR.

    “Resultantly, since many years, the registered taxpayers are less than 1 percent of the population of our country, which need to be enhanced”, he concluded.

  • Budget Strategy: No amnesty schemes; individual tax threshold to be lowered for broadening of tax base

    Budget Strategy: No amnesty schemes; individual tax threshold to be lowered for broadening of tax base

    ISLAMABAD: The government has prepared budget strategy under which no more amnesty scheme will be offered in future. Meanwhile, the tax threshold to broaden the tax base.

    The medium term budget strategy paper 2020/2023 released by the ministry of finance stated that the government will increase the share of direct taxes in revenues by enforcing real-income based income tax, to be achieved by broadening of tax base.

    Documentation of the economy to increase taxation in wholesale and retail, real estate and speculation businesses is also a priority. “Amnesty schemes will no longer be offered, and exemptions will be curtailed. Income tax slabs will be rationalised, and thresholds will be lowered to broaden tax base.”

    Gradual phasing out of final tax regime will help in taxing real income. Through amendments in tax law, simplification of laws and regulations, and improvement in tax administration, a legal basis will be provided to risk-based audit system.

    Taxpayer facilitation measures include awareness campaign and taxpayer education facilitation. Investments in IT based customer relationship management system, support lines, emails and website will be strengthened.

    Measures will also be taken to encourage voluntary compliance through facilitation measures and increasing certainty of detection and enforcement of law.

    Proper targeted awareness campaign through official media houses, using commercial media means will be carried out.

    FBR is effectively using Information Technology support for efficient detection, monitoring and facilitation of the tax regime. Data on foreign bank accounts of Pakistani citizens is being received and analyzed to detect tax evasion.

    IT based databank regarding foreign bank accounts will be established. Tracking and tracing system for collection of Federal excises duty on cigarettes has commenced with the issuance of licenses. Electronic monitoring of production and sales of various sectors will also commence in due course of time.

    Installation of point-of-sale (PoS) integration on all Tier-I retailers has been enforced since 15 December 2019.The online integration of the prescribed registered persons with PoS will be enforced through effective monitoring. FBR is developing IT strategy for this.

    The recently launched app “Tax Asaan” will be improved and more features will be introduced to make it user friendly. Introduction of Corporate Income Tax (CIT) reform will result in fewer exemptions and crediting schemes.

    The practice of issuing new preferential tax treatments or exemptions will be discontinued so that tax exemptions as a tool for philanthropy and social, investment and export promotion are discouraged.

    Exemptions will be phased out except basic food and nutrition items and provisions of health sector. Harmonization between Federal and Provincial taxation regimes is to be achieved by removing duplication of taxation and introducing uniform laws and procedures.

    The constitution assigns income taxes (except for agriculture income), the General Sales Tax on goods, customs duties, federal excises, and the capital gains tax to the federal level to be collected by the Federal Board of Revenue (FBR).

    While, GST on services, tax on professions, Agricultural Income Tax, Motor Vehicle Tax, Urban Immovable Property Tax, and other taxes related to real estate (e.g. stamp duty, Capital Value Tax) are assigned to the provinces.

    This arrangement fragments Pakistan into five tax jurisdictions in the services sector, with consequences such as double taxation, cascading effects of taxes and high compliance burden.

    Work on a unified tax portal with standardised forms that will enable taxpayers to file and pay federal and provincial taxes with less cost and compliance time will be completed.

    In 2020-2021, FBR will be working on removal of structural anomalies in the taxation regime such as anomalies from SROs (Statutory Regulatory Orders) / aligning certain SROs with the main statute and Rules, Simplified tax returns and forms.

  • FBR invites sales tax proposals to eliminate flying invoices, tax fraud

    FBR invites sales tax proposals to eliminate flying invoices, tax fraud

    The Federal Board of Revenue (FBR) has issued an invitation to business chambers and associations to submit their sales tax and federal excise proposals for the upcoming budget 2020/2021. The primary aim is to eliminate flying invoices and tax fraud while broadening the tax base and increasing revenue.

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  • FBR asked to suggest measure to eliminate exemptions

    FBR asked to suggest measure to eliminate exemptions

    ISLAMABAD: The ministry of finance has asked Federal Board of Revenue (FBR) to suggest measure to eliminate exemptions and concessions.

    The Finance Division (Budget Wing) of the finance ministry asked the FBR to provide information for development of budget strategy paper 2020-2021 – 2022-2023.

    The finance division asked the FBR to provide information on the key points:

    01. Tax policy over the medium-term including measure to eliminate exemption / concessions.

    02. Planned tax administration reforms to enhance tax-base and improve tax-to-GDP ratio.

    03. Number and types of new sectors, which were out of the tax net, to be added in the tax system.