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Category: Taxation

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  • All income tax audit selections should bring under one provision

    All income tax audit selections should bring under one provision

    KARACHI: Federal Board of Revenue (FBR) has been urged to eliminate audit selection under various provisions of Income Tax Ordinance, 2001 for the confidence building of taxpayers.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, said that presently audit proceedings can be started u/s 177 as well as through balloting u/s 214C and like-wise enquiries can also be made by the Commissioner u/s 122(5A).

    There is a concept of a special audit panel u/s 177(11) as well.

    Sub-Section 7 is ambiguous and provides the Commissioner and his sub ordinates with a tool to harass, extort and victimize any taxpayer at will.

    The Commissioner can reopen the audit of any person or firm at will on unsubstantiated grounds.

    Under sub-Section 4 of Section 177, any person employed by a firm to conduct audit function may be authorized by the Commissioner to exercise powers under sections 175 and section 176.

    The chamber said that the revenue collection through such recovery proceedings is hardly Rs.92 billion whereas the costs due to litigation, involvement of entire tax collection machinery and declining number of tax filers, is far more than the collection.

    Multiple Audits under various provisions have eroded the trust of tax-payers in the FBR. RTOs and LTUs. Audit functions under various provisions have created confusion and complexity in tax regime.

    Such provisions are also prone to misuse and a source of harassment.

    The KCCI proposed that all Audit functions should be brought under one provision of Income Tax Ordinance rather than various over-lapping provisions with clear and well defined parameters.

    Audit Parameters should be transparent and open to taxpayers.

    Further, Sub-Section 7 may be deleted.

    Powers of the Commissioner and sub-ordinate officials should be curtailed to restore the trust of taxpayers and encourage broadening of tax-base.

    Such Audits should be restricted to specific queries or objections and call for relevant document only rather than opening and re-opening a comprehensive audit every time.

    The chamber said that it will bring transparency and clarity to Audit functions and rules governing the same.

    Prevent harassment to tax payers and abuse of powers by Inland Revenue officials. Broaden tax base by restoring confidence in the system.

  • FBR records 31 percent decline in May collection

    FBR records 31 percent decline in May collection

    ISLAMABAD: Federal Board of Revenue (FBR) has recorded 31 percent decline in revenue collection during May 2020 owing to halt in economic activities after lockdown imposition.

    According to provisional figures released by the FBR on Sunday, the tax authorities collected Rs227 billion in May 2020 as compared with Rs330.1 billion collected in the same month of the last fiscal year.

    The massive fall in revenue collection has been attributed to halt in business activities due to lockdown which was imposed to stop spread the coronavirus.

    FBR spokesman in a statement said that despite lockdown in the country the revenue body collected Rs3,518 billion during July – May 2019/2020 as compared with Rs3,266 billion in the corresponding period of the last fiscal year.

    The revenue collection for the current fiscal year has been reduced to Rs3,908 billion from actual target of Rs5,500 billion initially set for the current fiscal year.

    The spokesman said that the FBR so far collected around 90 percent of the assigned target of Rs3,908 billion.

  • FBR discontinues manual payment of income tax refunds

    FBR discontinues manual payment of income tax refunds

    ISLAMABAD: Federal Board of Revenue (FBR) has discontinued manual issuance of income tax refunds with immediate effect to ensure transparency.

    The release of income tax refunds will be carried out electronically, said an office order of the FBR dated May 29, 2020.

    The FBR is going to disburse income tax refunds directly to bank accounts of claimants. In this regard, the finance ministry released an amount of Rs10 billion for payment of income tax refunds, official sources said on Saturday.

    The finance ministry initially provided the fund of Rs10 billion to the FBR for sanctioning of income tax refunds to taxpayers.

    The FBR decided to liquidate amount of Rs5 million claims out of the fund. Pending income tax refunds already prepared and kept in draft mode in Iris by the relevant officers where the amount of Rs5 million (cumulatively) has to be liquidated at this stage.

    The FBR further explained that cumulatively means the total amount of refund in respect of a taxpayer (for the tax year 2014 to 2019) duly processed and sanctioned under the law.

    The FBR further directed the chief commissioners that bank-wise (with IBAN numbers) taxpayers-wise lists of cases ripe for the sanctioning of income tax refunds up to Rs5 million should be dispatched by May 31, 2020.

    The FBR said that since the entire process of refund issuance under Prime Minister’s COVID-19 Package had to be carried out electronically, by disbursal of refunds through the AGPR, therefore, no manual issuance of income tax refunds is allowed till further orders.

  • SRB urged to allow normal tax for car dealers

    SRB urged to allow normal tax for car dealers

    KARACHI: Sindh Revenue Board (SRB) has been urged to bring authorized dealers of car manufacturers into normal tax regime.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to SRB, recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    It said that sales tax on services by authorized car dealers under tariff heading 9806.4000, is at reduced rates and input sales tax is barred, while no such position is available under any of the other provincial sales tax laws.

    Further, no option is available to the service provider to pay sales tax at the normal rate at the rate of 13 percent, instead of reduced rate, as provided for other services under notification No.SRB 3-4/5/2015 dated Jul 01, 2015, e.g. Construction services, Transportation services, Concrete services etc.

    The OICCI recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    Alternatively, option should be provided to “authorized car dealers of vehicle manufacturers” to pay sales tax at normal rate under tariff heading 9806.4000, as provided to other services.

    Application of standard rate will eliminate the discrimination arising on services provided by dealers in Sindh against other provinces and cost of doing business will reduce for service providers and recipients, it added.

  • FBR recommended CNIC condition on sale of above 10 tola gold

    FBR recommended CNIC condition on sale of above 10 tola gold

    KARACHI: Federal Board of Revenue (FBR) has been urged to fix the condition of Computerized National Identity Card (CNIC) on purchase of around 10 Tola or above of gold.

    Karachi Chamber of Commerce and Industry (KCCI) in proposals for budget 2020/2021 submitted to FBR, said that during last two years, prices of gold has sharply increased and the amount of Rs.50,000 is quite irrational and unfair due to high value of precious metal.

    Only 7 grams gold jeweler will cost more than Rs.50,000, the KCCI said.

    Highlighting the impact, the KCCI said that the customers will deal directly with unorganized sector / workshops

    – Mostly undocumented jewelers benefit from requirement of CNIC for purchases above Rs.50000/-

    – Will encourage under reporting of transactions

    – Will result in loss of taxes to government

    The chamber therefore proposed that the issue may been seen realistically and condition of NIC be imposed on purchase of 10 tolas or more.

    It will boost official business activities and will also generate and promote economic activities besides generating revenue for the government as well.

  • FBR advised to withdraw powers of freezing bank accounts for tax recovery

    FBR advised to withdraw powers of freezing bank accounts for tax recovery

    KARACHI: Federal Board of Revenue (FBR) has been advised to withdraw powers of tax officials related to freezing bank accounts for tax recovery.

    Karachi Chamber of Commerce and Industry (KCCI) in its budget proposals for 2020/2021 submitted to the FBR highlighted provisions of Income Tax Ordinance, 2001 regarding accessing bank accounts for tax recovery.

    Under Section 140 of the Income Tax Ordinance, 2001 which deals with recovery of tax from persons holding money on behalf of a taxpayer.

    — (1) For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –

    (a) owing or who may owe money to the taxpayer; or

    (b) holding or who may hold money for, or on account of the taxpayer.

    This provision and further access to information on a bank accounts under other provisions of law, have been counterproductive and led to a flourishing cash economy, the KCCI said.

    It said that there were many innovative ways been evolved by businesses similar to the blockchain and local hundi system.

    Such provisions only affect the registered businesses while the entire unregistered sector is immune from such laws and a coercive approach.

    Banks are also suffering with decline in deposits and transactions which used to be conducted through the system. It is evident from a slowdown in economic activities, the chamber said.

    It is better to do way with such anti-growth and anti-business policies and laws. Powers to access the bank accounts of registered persons and to freeze account should be withdrawn through Finance Bill 2020.

    Access may only be limited to accounts of unregistered persons, but account may not be blocked or frozen.

    Commissioner should only be authorized to obtain information about the funds in accounts and should be authorized to seek clarification as to the nature of transactions and sources of funds. Such persons may be brought into the tax-net.

    The Karachi Chamber said that the proposed amendments would provide relief to the registered persons and restore confidence in banking system and would encourage official transactions.

    Besides, it would help in bringing unregistered persons into the tax-regime.

    Stimulate economic activities and growth. Increase bank deposits which may be used for lending to industry.

  • FBR suggested to abolish further sales tax on fulfilling CNIC condition

    FBR suggested to abolish further sales tax on fulfilling CNIC condition

    KARACHI: Federal Board of Revenue (FBR) has been proposed to abolish further sales tax in case taxpayers fulfil condition of Computerized National Identity Card (CNIC).

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  • Mandatory training courses for promotions to be completed through tele-teaching

    Mandatory training courses for promotions to be completed through tele-teaching

    ISLAMABAD: The mandatory training courses for promotion of government officers including from Federal Board of Revenue (FBR) will be held online considering COVID-19 pandemic, a notification said.

    In this regard National School of Public Policy (NSPP) informed that all the courses of NSPP i.e. 112th National Management Course (NMC), 27th Senior Management Courses (SMC) and 29th Mid-Career Management Course (NCMC) have been redesigned keeping in view the prevailing health emergency on account of of COVID-19.

    “Remaining training activities will be completed through remote tele-teaching mode by using Zoom/Skype and e-portal of respective courses,” it said.

    “These essentially comprise of Simulation Exercise, Case Studies, Analysis Papers, Topical Discussions and Research Papers particularly related to the foreign study tour of the respective country assigned to different participants of NMC.”

    The notification said that the courses had been rescheduled by reducing the duration of three weeks of NMC, five weeks of SMC and three weeks of MCMC respectively subject to the slight modifications by the respective NIMs made keeping in view the activities completed before the suspension of the courses.

    The participants have been asked to join the 112th NMC, 27th SMC and 29th MCMC respectively with effect from June 01, 2020 through e-portal of the respective unit.

  • Insurance should be excluded from taxable services

    Insurance should be excluded from taxable services

    KARACHI: The provincial tax authorities have been urged to exclude insurance from taxable services in order to provide incentives to insurance industry.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to Sindh Revenue Board (SRB), said that each year, the life/health insurance companies have been approaching the SRB for an exemption, which is granted annually.

    The last exemption for life insurance was valid only till June 30, 2019, whereas exemption for Corporate Health Insurance is valid till June 30, 2020 and has not yet been renewed.

    The life and health insurance industry is based largely in the province of Sindh, where, the medical sector itself is exempt from SST.

    Accordingly, subjecting the corporate health insurance to SST is making it uncompetitive, in Sindh, by adding on to the cost of health insurance.

    Discussions are still ongoing with the Chairman SRB, and the Chairperson, Sindh Board of Investment, for exemption on the same.

    The OICCI recommended that both, life insurance and health insurance, which do not fall within the scope of definition of service, should be permanently included in the list of exempted services by incorporating the same under table of exempted services specified in SRB’s notification no. SRB 3-4/7/2013 dated June 18, 2013, as per the following:

    01. 9813.15: Life Insurance

    02. 9813.16: Health insurance, rendered to both, individuals and corporates.

    It may be mentioned that in Sindh these are taxable services.

    A life insurance/ health policy is not a service. It is an underwriter’s promise to pay to the policy holder ‘in the future’, a specified sum of money, ‘either on occurrence of an identified event or on maturity of the policy’.

    Such tax is highly discriminatory as entire health sector itself remains exempt and is not taxed.

    This creates a deterrence for insurance business, as a person obtaining insurance would be paying additional 13 percent as well as cost of insurance, compared to directly obtaining health services, where he does not have to pay this tax.

    This is clearly discriminatory and in violation of Article 25 of the Constitution of Pakistan.

    The assertion that insurance is not a service, has also been legally upheld in USA and the Court there has ruled that life insurance policies are not “services”.

    The KP Revenue Authority has exempted life insurance from the purview of taxable services. Uniformity across the country is essential for ease of doing business.

  • Massive increase in penalty amount on the cards for violating tax laws

    Massive increase in penalty amount on the cards for violating tax laws

    Tax authorities are considering a significant increase in monetary penalties for violations of general provisions of income tax laws. According to sources within the Federal Board of Revenue (FBR), the Large Taxpayers Unit (LTU) Karachi has submitted proposals for the budget 2020/2021, suggesting an increase in fines and penalties from the current Rs5,000 to Rs50,000.

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