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 suggested reducing income tax rate for banks

    FBR suggested reducing income tax rate for banks

    KARACHI: Federal Board of Revenue (FBR) has been advised to reduce income tax rates for banking companies in line with general corporate tax rates.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the banking sector tax rates have not been reduced in line with the general corporate tax rates.

    Furthermore, Finance Supplementary (Second Amendment) Bill 2019, proposed to again amend the First Schedule to the Income Tax Ordinance 2001, whereby, Super Tax of 4 percent is applicable on banks from tax year 2018 to tax year 2021.

    The banks, in compliance with the prevailing taxation regime have already closed the tax year 2018 (accounting year 2017) and income tax returns have already been duly filed/assessed.

    As a result of the proposed abovementioned retrospective application from tax year 2018 (accounting year 2017), banks would now have to effectively pay super tax for two years or 8 percent instead of 4 percent in tax year 2019 i.e. 4 percent already paid in advance for tax year 2019 along with retrospective charge of 4 percent now being proposed for tax year 2018.

    The OICCI suggested that the tax rates of the banking sector should be aligned with other sectors.

    It is recommended, application of super tax on tax year 2018 should be removed to avoid the double charge of super tax in tax year 2019.

    Furthermore, it is requested that the same overall relief on super tax, granted to other industries, is also provided to the banking sector as well.

  • PTBA urges benefits for taxpayers opting out of PTR

    PTBA urges benefits for taxpayers opting out of PTR

    KARACHI: Pakistan Tax Bar Association (PTBA) has urged the tax authorities to give benefits to persons opting out of presumptive tax regime (PTR).

    In its proposals for budget 2019/2020, the apex tax bar said that through Finance Act, 2012 positive steps were taken for opting out of presumptive tax regime in respect of sale of goods, import and export of goods, subject to certain conditions, which were highly appreciated.

    The Finance Act, 2014, however reversed the amendments and in place thereof inserted new clauses (56B), (56C), (56D), (56E), (56F) and (56G); whereby certain persons may opt out of the final tax regime by filing the return of income along with accounts and documents as may be prescribed subject to the condition that their minimum tax liability under normal tax regime shall not be less than the tax already collected/deducted at the applicable rates of the respective Sections.

    The Finance Act, 2014 also inserted certain new clauses on similar lines. Under these clauses, the option to opt out of the final tax regime was provided to a person who provides services of stitching, dying, printing, embroidery, washing, sizing and weaving to exporters or an export house.

    Furthermore, petrol pump operators and persons earning commission or brokerage are also provided with such an option.

    Under the new clauses introduced by the Finance Act, 2014, the tax liability of persons is higher than the tax liability they were required to pay under the initiative introduced vide the Finance Act, 2012.

    “Furthermore, it should be noted that as per the current position of the law, the taxpayers would, in practice, not obtain any financial benefit by opting out of the presumptive regime and would instead be required to face the additional burdens and risks of tax audits,” the tax bar said.

    The PTBA said that the options introduced by the Finance Act, 2012 should be reintroduced or alternatively, as a first step the corporate sector is given option to opt out from presumptive taxation.

    The proposed modification may help starting the journey to tax real income instead of taxation under the PTR reduces the additional burdens imposed on the corporate sector.

  • ICAP suggests reviewing extra tax on electricity, gas consumption by industrial, commercial consumers

    ICAP suggests reviewing extra tax on electricity, gas consumption by industrial, commercial consumers

    KARACHI: Institute of Chartered Accountants of Pakistan (ICAP) has suggested the tax authorities to review imposition of extra sales tax on electricity and gas as this levy is passed unnecessarily to consumers by utility companies.

    The ICAP in its tax proposals for budget 2019/2020 submitted to Federal Board of Revenue (FBR) said that in terms of SRO 509(I)/2013 read with Special Procedures thereof, every electric power and gas distribution company / organization supplying electricity or gas to commercial and industrial consumers is required to charge and collect extra tax at 5 percent having monthly bill exceeding Rs15,000/- and which have either not provided their sales tax registration number or not appearing in the Active Taxpayers’ List.

    The ICAP said that to make reasonable amendments in SRO 509(I)/2013 considering the practical issues being faced by taxpayers as given below in “rational for change.”

    This SRO has posed following questions, as a result of which extra tax is unnecessarily being passed on by utility companies to its consumers:

    a) Majority of electricity connections / accounts are maintained in the name of person who possesses the ownership of commercial / industrial property.

    Therefore, particulars of the consumers available on sales tax registration certificate / upon FBR portal do not match with the name of the account holders.

    b) Banks, Insurance companies, Telecommunication companies, Large Multinational and other similar organizations operate through numerous business locations, manufacturing premises, facilitation offices, distribution & warehouses which, in most cases, are not in the name of such organizations.

    Further, sales tax registration particulars on FBR Portal do not reflect all such business places from which business operations are carried out.

    If the procedures envisaged in SRO 509 are followed, extra tax would be charged and collected from registered persons in respect of all of their electric connections, which are not in the name of such registered persons.

    Furthermore, updation of these particulars (e.g.business locations) on FBR database may take considerable time and Banks, Insurance companies, Telecommunication\ companies, Large Multinational which are already registered for sales tax, will have to bear extra tax of 5 percent on all such electric & gas connection just because they are not updated in their name over FBR Web Portal.

    c) Institutions owned by Federal and Provincial governments, defense organization, social sector institution and various other service providers are either not required to obtain sales tax registration number or are registered under Provincial Law.

    Hence, they neither possess any sales tax registration number nor are required to obtain any registration under the STA.

    However, most of the aforesaid organizations or institutions are commercial consumers and by virtue of the SRO, they are unnecessarily suffering extra tax.

    d) Cottage Industry, retailers, hospitals, various agencies, diplomatic missions, privileged persons and organizations have been specifically exempted under the Sixth Schedule to the STA and are not required to obtain registration.

    However, most of the aforesaid organizations or institutions are commercial consumers and by virtue of SRO, they are unnecessarily suffering extra tax.

    e) Payment of extra tax on accrual basis (bill basis) by utility companies in the backdrop of low recovery ratio / non-payment of electricity bill by government and private institutions poses a great liquidity threat to utility companies.

    “Hence, it is recommended that extra tax should be recovered on receipt basis, as it was never a tool for revenue generation but a penal provision to induce registration drive.”

  • Additional advance tax proposed on all type of motor vehicles to discourage premium

    Additional advance tax proposed on all type of motor vehicles to discourage premium

    The Overseas Chamber of Commerce and Industry (OICCI), representing foreign investors and multinational companies in Pakistan, has proposed the imposition of an additional advance tax of Rs100,000 on all types of motor vehicles sold before registration.

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  • PTBA recommends retaining alternative corporate tax or minimum tax

    PTBA recommends retaining alternative corporate tax or minimum tax

    KARACHI: Pakistan Tax Bar Association (PTBA) has recommended the tax authorities to retain either Alternative Corporate Tax (ACT) or minimum tax, as existence of both regimes is inappropriate.

    (more…)
  • FBR advised to stop treating taxpayers unfairly

    FBR advised to stop treating taxpayers unfairly

    KARACHI: Federal Board of Revenue (FBR) has been urged to stop unfair treatment of compliant taxpayers. The taxpayers should be rewarded instead of harassing them for being compliant.

    Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020, said that at present, existing tax payers are confronted with complex laws and unfair treatment by FBR’s personnel and are also threatened at times.

    Taxpayers expect to obtain some form of benefit, e.g. health benefits, free education etc. while on the other hand, non-filers continue with their businesses facing no repercussions paying little or no amount of tax.

    “This coupled with the harassment by tax system leads to existing tax payers feeling mistreated.”

    The ICAP recommended:

    As per section 182A, a person filing his/her return of income after the due date remains non-filer for the entire next year.

    In order to encourage filing of returns, persons filing returns late should not be discouraged and should be brought in Active Taxpayers List (ATL).

    Penalty provisions are already there to address delayed filings.

    Active taxpayers list should be updated simultaneously with the filling of return of income.

    Some mechanism should be developed to stop all types of unfair treatment with existing taxpayers be it attachment of bank accounts for substantially fictitious demands or asking for absurd details and reconciliations which are too voluminous and not possible to prepare within a reasonable timeframe e.g. explanation of each and every credit entry in the bank statements or reconciling sales and purchases as per sales tax and customs records with accounts.

    A person, whose case is selected for audit under the provision of tax laws, should not be subject to monitoring of withholding taxes and other assessment proceedings as same information/details/explanations are asked again and again for different proceeding creating hassle for the filer/registered person.

    Filers should be given priority treatment at various infrastructural facilities e.g., at NADRA, schools, excise and taxation when registering motor vehicles, courts of law, banks, hospitals, airports etc.

    Top 50/100 tax payers are given blue passports till the time they remain in the list of top 50/100.

    Incentives for compliant tax payers and professionals (Doctors, Engineers, Lawyers, Chartered Accountants, reduction in tax rates, tax education through media – pubic private partnership.

    A tax filer with over 20 years of tax payment history should be treated with respect & certain tax rebates should be allowed to them including on utility bills.

    Likewise a person who has been a genuine taxpayer for 20 years who is over 70 years should be exempted from tax deductions.

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  • Higher duty rates proposed for car, luxury items import

    Higher duty rates proposed for car, luxury items import

    KARACHI: The Federal Board of Revenue (FBR) has been suggested to impose higher rates of duties on import of non-essential and luxury items in order to reduce current account deficit.

    Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 said that tangible measures should be taken to reduce the import burden.

    “Heavy duties should be levied on all non-essential imports like expensive electronics, cars & luxury items.”

    In addition incentives should be announced for local industry to encourage domestic products, it suggested.

    In other key reforms, the ACCA said that agricultural sector needs to be re-evaluated.

    Being an agricultural country its GDP share must be according to its volume. Currently its share in GDP is 24 percent while it has the potential to reach up to 55 percent.

    Large landowners should be taxed at minimal rates i.e. 7 percent with that revenue used to subsidize seeds, fertilizers, water, electricity, fuel, etc. for the small farmers.

    Cheap and low quality smuggling and imports from India should be controlled.

    The ACCA said that for Pakistan, a country of 220 million people, human capital is a huge resource in new era, but unfortunately due to incompetent and poor policies we are unable to convert this power in to workable force, un-employment has increased to almost 6 percent and over 4 million people are unemployed.

    Keeping in view the above indicators the government needs to encourage services sectors, new industries and agriculture.

    Banking sector should be used to incentivize and promote a culture of entrepreneurship.

    Incentives must be announced for Services sectors particularly Telecom, home based industries, young entrepreneurship programs with special focus on women.

  • PTBA suggests 5-year policy for gradually reducing sales tax rate

    PTBA suggests 5-year policy for gradually reducing sales tax rate

    KARACHI: Pakistan Tax Bar Association (PTBA) has suggested gradually reduction of sales tax rate under five-year policy and for first year the sales tax rate should be brought down to 15 percent from next fiscal year.

    In its budget proposals for 2019/2020, the PTBA said that present rate of Sales Tax at 17 percent with 3 percent value addition tax on commercial importers is too high.

    It said that there is a narrow tax base due to the high rate which induces tax evasion, under invoicing, corruption and smuggling.

    The PTBA proposed that this year as a first step Sales Tax Rate may be brought down to 15 percent and five year policy may be announced for reduction of rate of tax by 1 percent every year.

    Moreover, same rate of value addition tax (i.e., 3 percent) may be levied on luxury goods which are expected to be sold at a higher value addition in the local market as compared to other goods.

    “Higher value addition tax should be levied on import of luxurious items such as cosmetics, shampoos, cars, etc.”

    It said that the proposed amendments would assist in the expansion of tax base, reduction in smuggling and corruption, rise in government revenues and increased competitive edge and promotion of documentation of economy.

    Furthermore, the reduced tax rate will encourage the unregistered persons to get themselves registered, resulting in broadening of tax base.

    Higher value addition tax on luxury goods will not only generate additional revenue but will discourage import and also support the local industry.

  • Exemption on import of telecom equipment demanded to encourage investment

    Exemption on import of telecom equipment demanded to encourage investment

    KARACHI: Foreign and multinational companies have demanded the Federal Board of Revenue (FBR) to exempt sales tax and customs duty on import of telecom equipment in order to encourage investment in this sector.

    The Overseas Chamber of Commerce and Industry (OICCI) in its proposals for budget 2019/2020 said that telecom was very investment intensive sector and it should be given concessions in terms of reduced rates of customs duties and exemption of sales tax against import of telecom equipment.

    The exemption and concessions are important to promote the teledensity throughout the country especially in far flung areas so that the benefits of next generation mobile services can be reached to the masses living in backward areas, said the OICCI – the representative body of foreign investors and multinational companies in Pakistan.

    Previously, telecom sector was importing telecom equipment at 5 percent customs duty and zero percent sales tax under SRO 575, however, through Finance Act, 2015, this SRO was rescinded and consequently, the customs duties on network equipment have been increased from 5 percent to 20 percent and sales tax exemption has been removed.

    “The increase in custom duty and levy of sales tax has badly affected the pace of growth and digital inclusion as the cost of doing business has been significantly increased which is an additional barrier to network coverage in Pakistan,” the OICCI said.

    The roll out of 3G/4G network is still very much at the early stages and reduction in customs duties and restoration of sales tax exemption will help the operators to sustain the necessary investments.

    Therefore, the OICCI recommended to reinstate the concessionary custom duties/ exemption of sales tax (refer SRO 575) to encourage investments in IT/ telecom infrastructure.

  • Elimination of regulatory duty, additional customs duty on essential raw materials recommended

    Elimination of regulatory duty, additional customs duty on essential raw materials recommended

    KARACHI: Federal Board of Revenue (FBR) has been suggested to eliminate additional customs duty and regulatory duty on essential raw materials.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals recommended tariff rationalization in the forthcoming for budget 2019/2020.

    It recommended elimination of additional custom duty and regulatory duty on essential raw materials, which are either not locally available or in limited supply, used for local manufacturing.

    The OICCI – the representative body of foreign investors – also suggested bringing illicit trade into tax ambit.

    It said that on the basis of survey conducted by OICCI amongst its members, losses to the government exchequer due to Illicit trade (business in products which are either smuggled, counterfeit, under-invoiced imports, sold by unregistered manufacturer/seller, etc.) is estimated at Rs200 billion (tobacco alone estimated at Rs63 billion only).

    In order to control the Afghan Transit Trade, it recommended:

    Harmonize duty and tax rates to remove the incentive for evasion.

    Fix quantitative limits for imports based on genuine Afghan needs and size of population.

    Establish a basis of collecting duty/taxes at the point of entry into Pakistan for the account of the Afghanistan Government

    Fix import value in consultation with the brand owner in Pakistan.

    Customs procedures and Cross-border rules should be published for transparency.

    Containers coming back from Afghanistan should be checked by customs.

    There should be a negative list of items which are not utilized in Afghanistan; yet are imported and make their way into Pakistan.

    Streamlining of border crossing procedures on financial guarantee by banks and anti‐corruption measures.

    Export to Afghanistan be facilitated with simplified procedure by FBR and border control authorities.

    For stringent controls illicit trade, it recommended:

    Introduce tighter penalties for illicit trade across categories, including criminal liability across the value chain, including retailers, distributors and manufacturers

    Introduce a special division/ task force to raid retailers and manufacturers to confiscate and destroy illicit stocks

    Launch a media campaign to increase awareness in consumers of the harms of illicit products and discourage them from purchasing such products

    The OICCI suggested structural reforms in the customs:

    Do a thorough review of the custom regime, in consultation with brand owners, to address issues of counterfeiting, smuggling, and rationalization of duty structure and fixing of import Tariff prices.

    Custom valuation should be done on modern lines through online search and matching international and regional pricing and taking local legal importers of items on board.

    IPR (Intellectual Property Rights) laws implementation in Pakistan need to be strengthened. Special IPR tribunals may be formed for speedy trials leading towards IPR compliance at par with international standards of IPR enforceability.

    Unauthorized imports of counterfeit products should be effectively checked through registration of brands with the custom authorities in coordination with the original brand owner/ registered in Pakistan.

    Valuation ruling should be issued in consultation with the owner of the brand or its authorized representative.

    The data of import should be public (restrictively) to ensure transparency and this will also help in taking over of goods under section 25A of the Custom Act, 1969.

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