Category: Budget

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has highlighted the issue of unjustified audit notices served to taxpayers and said as a result companies are incurring huge administrative costs.

The OICCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) pointed out that each year companies are served with notices without any proper justification, requiring them to produce large volume of data and reconciliation.

READ MORE: Foreign investors demand inter-adjustment of tax refunds

This is against the concept of Universal Self-Assessment Scheme whereby a tax return filed is generally considered to be correct in the eyes of FBR unless there is proper justification to prove otherwise.

“As a result, companies are incurring huge administrative costs for audit every year as well as litigation costs to pursue their matters before various appellate forums for an indefinite period of time,” the OICCI said.

READ MORE: OICCI presents recommendations to eliminate illicit trade

It recommended that the previous limitation of conducting tax audits once in every three years should be restored.

Rules to be implemented under Section 177(2) of Income Tax Ordinance, 2001 defining risk based, sample driven and cost-efficient audit criteria instead of calling 100 per cent information for voluminous transactional data resulting in tedious exercises, wastage of man hours and no additional benefits to national exchequer.

Timeline to conclude audit after submission of requisite information by the taxpayer should be specifically provided in section 177 of the Ordinance.

READ MORE: OICCI urges harmonize sales tax rates

FBR letter on withdrawal of earlier directives related to attachment of bank accounts dated October 11, 2021 should be withdrawn and it should be provided in the law that recovery proceedings shall not be initiated until tax assessments have passed at least one independent forum.

To reduce the litigation disposal time and avoid unnecessary litigations, it is recommended: “Proviso should be added to section 124 that in case Commissioner fails to issue appeal effect order within stipulated time period, taxpayers’ position should be deemed in effect.”

READ MORE: OICCI suggests simplify issuance of exemption certificate

The Overseas Investors Chamber of Commerce and Industry (OICCI), representing foreign investors in Pakistan, has put forth a series of demands to the Federal Board of Revenue (FBR), with a key focus on the inter-adjustment of income and sales tax refunds as part of the law.

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has presented recommendations to eliminate illicit trade in Pakistan.

In its proposals for budget 2022/2023 presented to the Federal Board of Revenue (FBR), the OICCI stressed the need of structural reforms in Pakistan customs to bring Illicit Trade into tax ambit.

READ MORE: OICCI urges harmonize sales tax rates

It said custom valuation should be done by using latest method of valuation including, online search and matching international and regional pricing and taking local legal brand owners on board.

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.

READ MORE: OICCI suggests simplify issuance of exemption certificate

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

Control the Afghan Transit Trade:

a) Revise the ATTA based on current reality, to protect the revenue base of Pakistan without hurting the real spirit of such agreements. Engage key stakeholders from OICCI and business community in Pakistan in such re-negotiation.

READ MORE: OICCI suggests revamping withholding tax regime

b) Pending above, harmonize duty and tax rates to remove the incentive for evasion.

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

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

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

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

Introduce stringent controls for illicit trade:

a) Introduce tighter penalties (e.g., criminal liability) for illicit trade across categories across the whole value chain – retailers, distributors, and manufacturers.

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

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the tax authorities to harmonize sales tax rates.

The OICCI in its proposals for budget 2022/2022 submitted to the Federal Board of Revenue (FBR) demanded reduction in sales tax rates.

The sales tax rate in Pakistan, at 17 per cent, is the highest in Asia, as can be noted from the table here.

The analysis of the OICCI shows an average of less than 12 per cent in Asia, with a range of 6 per cent to 17 per cent.

READ MORE: OICCI suggests simplify issuance of exemption certificate

Moreover, different rates of sales tax on goods and services i.e. standard, reduced, specified etc. prevailing in the country lead to a number of issues for business organizations operating all over the country.

It is recommended that sales tax rates (federal and provincial), both on goods and services, should be harmonized throughout the country.

Earlier, the OICCI suggested the FBR to revamp withholding income tax regime in order to facilitate compliant taxpayers.

In line with the recommendations, the withholding tax regime has been subject to changes, the rationalization of withholding tax on imports and discriminating withholding tax on the basis of status of the payee is a good step towards rationalization of regime. However, there is still large room for improvement. The impact of the withholding tax regime on “Ease of Doing Business” for the large taxpayers is still very significant.

READ MORE: OICCI suggests revamping withholding tax regime

WHT regime should be revamped and reduced from existing over twenty-six to five rates only for filers.

Withholding tax should be applicable on inactive taxpayers only, or alternatively:

a) Withholding tax rates applicable on services is 8 per cent 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.

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

b) Withholding tax deduction under section 153 (1)(a) of Income Tax Ordinance, 2001 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.

READ MORE: Foreign investors seek reduction in corporate tax rate

Through Finance Act 2021 under section 165 of Income Tax Ordinance, 2001, requirement of filing reconciliation between annual withholding statement and audited accounts is introduced. It has resulted in additional compliance burden on active taxpayers and should be abolished.

Companies appearing in Active Taxpayers List (ATL) and obtained exemption certificate by discharge of full year tax liability in advance should be dispensed with requirements to obtain separate withholding tax exemption certificates under sections 151, 234, 235, 236, 236G and 236H.

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended the tax authorities to simplify issuance of exemption certificate in order to facilitate taxpayers.

It its proposals for budget 2022/2023, the OICCI suggested the Federal Board of Revenue (FBR) to simplify the procedure of exemption certificate issuance.

READ MORE: OICCI suggests revamping withholding tax regime

It said delays in processing of exemptions certificates by department and un-necessary requirements to obtain exemption certificates under various sections of Ordinance results in hardship and refundable build ups due to tax deduction at source.

The OICCI recommended that the requirement to obtain exemption certificates for Companies having exempt income shall be dispensed with. For example, retirement funds, companies in tax holidays etc.

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

Companies that have discharged their full year tax liability in advance under section 148 / 153 of Income Tax Ordinance, 2001 shall also be issued exemption certificates under other provisions of Ordinance (for example Section 151, 233 etc.).

Furthermore, in respect of filer and compliant taxpayers 15 days limit for auto-issuance of exemption certificate as presently in case of Section 153 of the Ordinance, should be extended to other sections.

The OICCI also demanded restoration of exemption against withholding of income tax under section 148 of Income Tax Ordinance, 2001.

READ MORE: Foreign investors seek reduction in corporate tax rate

It recommended that exemption against withholding tax u/s 148 of the Ordinance be restored as previously available through clause 72B of the part I of the Second Schedule. Moreover, the criteria for obtaining 148 exemptions should be based on discharge of advance tax liability as per section 147 of the Income Tax Ordinance, 2001.

Adjustability of advance Tax Under section 148(7) available to industrial undertaking shall also be extended to service sector. It is recommended to amend the section in following manner:

READ MORE: Tax rates key element to attract foreign direct investment

“The tax required to be collected under this section shall be minimum tax on the income of the importer arising from the imports subject to sub-section (1) and this sub-section shall not apply in the case of import of goods on which tax is required to be collected under this section for internal consumption in the business”.

Section 48(1) of the Ordinance should allow automatic issuance of exemption certificate in line with Section 153.

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has suggested the authorities to revamp withholding tax regime in order to facilitate compliant taxpayers.

The OICCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) recommended revamping of withholding tax regime, which is one of the key irritants for compliant taxpayers.

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

In line with the recommendations, the withholding tax regime has been subject to changes, the rationalization of withholding tax on imports and discriminating withholding tax on the basis of status of the payee is a good step towards rationalization of regime. However, there is still large room for improvement. The impact of the withholding tax regime on “Ease of Doing Business” for the large taxpayers is still very significant.

READ MORE: Foreign investors seek reduction in corporate tax rate

WHT regime should be revamped and reduced from existing over twenty-six to five rates only for filers.

Withholding tax should be applicable on inactive taxpayers only, or alternatively:

a) Withholding tax rates applicable on services is 8 per cent 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.

READ MORE: Tax rates key element to attract foreign direct investment

b) Withholding tax deduction under section 153 (1)(a) of Income Tax Ordinance, 2001 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.

Through Finance Act 2021 under section 165 of Income Tax Ordinance, 2001, requirement of filing reconciliation between annual withholding statement and audited accounts is introduced. It has resulted in additional compliance burden on active taxpayers and should be abolished.

Companies appearing in Active Taxpayers List (ATL) and obtained exemption certificate by discharge of full year tax liability in advance should be dispensed with requirements to obtain separate withholding tax exemption certificates under sections 151, 234, 235, 236, 236G and 236H.

READ MORE: KTBA recommends separate tax fraud proceedings

Payments to non-residents cannot be processed without obtaining exemption certificate from Commissioner (within 30 days of request). To facilitate timely payments the period of 30 days under 152(5A) shall be curtailed to 15 days and in the absence of any confirmation within 15 days request shall be deemed to approved.

The following clarification to be inserted after clause 153(7)(iii), to provide tax neutrality for assets financed by Islamic banking of conventional vis- a vis conventional banks.

READ MORE: FBR urged to remove irritants in sales tax refund

“For the removal of doubt, it is clarified that any goods delivered under an Islamic mode of financing by a bank or financial institution approved by the State Bank of Pakistan or the Securities Exchange Commission of Pakistan, shall not be considered as sale of goods for the purpose of this section.”

KARACHI: Federal Board of Revenue (FBR) has been proposed to reduce the general rate of minimum tax to 0.25 per cent.

The Overseas Investor Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 advised the FBR to review minimum tax regime (MTR) / abolish alternative corporate tax (ACT) under Section 113 and 113C of Income Tax Ordinance, 2001.

READ MORE: Foreign investors seek reduction in corporate tax rate

The OICCI recommended that the general rate of Minimum Tax under section 113 of ITO 2001 should be reduced to 0.25 per cent.

For businesses dealing in sectors with high turnover and low margins, (eg. Oil Marketing/ Refineries/ LNG Terminal Operators, large chemical companies, authorized dealers of local vehicle manufacturers, distributors, and traders, including large trading houses), this rate should be applicable on gross profits instead of turnover.

READ MORE: Tax rates key element to attract foreign direct investment

All streams of income including income of commercial importers should be taxed under the normal tax regime. Special tax regimes should only be restricted to non-corporate or in-active taxpayers.

Alternative Corporate Tax under section 113C should be abolished in presence of Minimum Tax under section 113.

READ MORE: KTBA recommends separate tax fraud proceedings

The OICCI earlier proposed that the FBR should continue the previously announced policy to annually reduce the tax rate from 29 per cent to eventually to rate of 25 per cent, including banking companies.

The corporate tax rate in Pakistan, at 29 per cent is higher than most of the regional countries, as can be noted from the table here.

Companies are required to pay various taxes in addition of income tax i.e., WWF (2 per cent), WPPF (5 per cent), Stamp Duty, Infra structure Cess (1.2 per cent) etc. which ultimately result in effective tax rate of around 35 per cent to 45 per cent which is far greater than effective tax rates of other countries in the region.

READ MORE: FBR urged to remove irritants in sales tax refund

KARACHI: The Federal Board of Revenue (FBR) has been suggested to gradually reduce the corporate tax rate from existing 29 per cent to 25 per cent.

Overseas Investors Chamber of Commerce and Industry (OICCI), a representative body of foreign investors operating in Pakistan, in its proposals for budget 2022/2023 proposed that the FBR should continue the previously announced policy to annually reduce the tax rate from 29 per cent to eventually to rate of 25 per cent, including banking companies.

READ MORE: Tax rates key element to attract foreign direct investment

The corporate tax rate in Pakistan, at 29 per cent is higher than most of the regional countries, as can be noted from the table here.

Companies are required to pay various taxes in addition of income tax i.e., WWF (2 per cent), WPPF (5 per cent), Stamp Duty, Infra structure Cess (1.2 per cent) etc. which ultimately result in effective tax rate of around 35 per cent to 45 per cent which is far greater than effective tax rates of other countries in the region.

READ MORE: KTBA recommends separate tax fraud proceedings

Earlier, the OICCI informed the FBR that the tax rates are key element for any prospective investors, including foreign investors and key influencers in attracting foreign direct investment (FDI).

It said that the tax environment and tax rates are key consideration for any prospective investors, including foreign investors and amongst the key influencers in attracting FDI into a country.

The OICCI, the representative body of the foreign investors operating in Pakistan, submitted the following proposals for budget 2022/2023:

Simplify the complex system of determining the corporate tax liability by:

a. Abolishing ACT (Alternative Corporate Tax);

READ MORE: FBR urged to remove irritants in sales tax refund

b. Revamping the MTR (Minimum Tax Regime)

c. Doing away with undue recurring audit/ examinations/ reviews and recovery proceedings.

d. A number of Ease of Doing Business (EODB) and simplification of tax paying process issues can be addressed by the introduction of:

i. Simplifying the procedures and forms for filing the sales tax and income tax return.

READ MORE: Unified sales tax law for all tax authorities sought

ii. One form for reporting all the tax liability in the country, including for FBR, and provincial revenue authorities, with efficient inter-revenue authorities’ coordination. Single Sales Tax return has not been fully implemented.

KARACHI: Tax rates are key element for any prospective investors, including foreign investors and key influencers in attracting foreign direct investment (FDI).

Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 sent to Federal Board of Revenue (FBR) said that the tax environment and tax rates are key consideration for any prospective investors, including foreign investors and amongst the key influencers in attracting FDI into a country.

READ MORE: KTBA recommends separate tax fraud proceedings

The OICCI, the representative body of the foreign investors operating in Pakistan, submitted the following proposals for budget 2022/2023:

Simplify the complex system of determining the corporate tax liability by:

a. Abolishing ACT (Alternative Corporate Tax);

b. Revamping the MTR (Minimum Tax Regime)

c. Doing away with undue recurring audit/ examinations/ reviews and recovery proceedings.

d. A number of Ease of Doing Business (EODB) and simplification of tax paying process issues can be addressed by the introduction of:

READ MORE: FBR urged to remove irritants in sales tax refund

i. Simplifying the procedures and forms for filing the sales tax and income tax return.

ii. One form for reporting all the tax liability in the country, including for FBR, and provincial revenue authorities, with efficient inter-revenue authorities’ coordination. Single Sales Tax return has not been fully implemented.

Tax policies should be predictable, transparent, and consistent. The policies should be implemented for long term to facilitate and protect longer term investment plans of local and foreign investors. No new taxes levied during the year except removing harsh anomalies – no supplementary budgetary measures.

The withholding tax regime continues to be a key irritant for most taxpayers, especially the manufacturing and services sector, and negatively impacts EODB.

READ MORE: Unified sales tax law for all tax authorities sought

Tax compliant sector provides FBR with information of registered/unregistered businesses, which FBR should use as a tool for broadening tax net. However, FBR unfairly penalizes these commercial organization by disallowing their legitimate expenses and input Sales tax through measures like those covered u/s 21(q) of Income Tax Ordinance, 23(1) and 8(1)(h) & (J) of Sales Tax Act.

Revenue Targets for field formations should be in line with the business growth trends. Unrealistic targets leads to harassment of compliant tax payers.

READ MORE: Proposals for recovery of sales tax on bad debts

To encourage investment in manufacturing facilities, incentives provided previously through various “tax credits” under section 65, should be restored.

OICCI will continue to emphasize on value creation through transparent and strong enforcement measures designed to facilitate compliant taxpayers and punish tax evaders. Furthermore, the value addition of our members should not only be measured from tax collection basis but also on the basis of creating livelihoods, promoting sustainable business model and supporting a tax compliant echo system.