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.
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Pakistan Revenue delivers the latest taxation news, covering income tax, sales tax, and customs duty. Stay updated with insights on tax policies, regulations, and financial developments in Pakistan.
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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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Customs announces auction of luxury vehicles on May 21
ISLAMABAD: Pakistan Customs announced public auction of luxury vehicles lying at Prime Minister House to be held on May 21, 2019 at State Warehouse, Islamabad Dry Port.
Following vehicles will be presented for auction:
01. BMWX5 Jeep, Model 2016 (armored), Chassis No. WBAKR6209G0M99712
02. BMWX5 Jeep, Model 2016 (armored), Chassis No. WBAKR620200M9904
03. BMWX5 Jeep, Model 2016 (armored), Chassis No. WBAKR6202G0M99714
04. Mercedes Benz S600L (Guard), Model 2016, Chassis No. WDD2221762A266834
05. Mercedes Benz S600L (Guard), Model 2016, Chassis No. WDD2221762A267771
06. Mercedes Benz Maybach S600, Model 2016, Chassis No. WDD2229762A265866
07. Mercedes Benz Maybach S600, Model 2016, Chassis No. WDD2229762A266494
08. BMW Car 761 U, Model 2014, Chassis No. CH-WBAHP42000DY99225
09. BMW Car 760 U, Model 2014, Chassis No. CH-WBAHP42020DY99226
10. Toyota Land Cruiser Jeep (Protected) Model 2014, Chassis No. URJ2024093203
11. Toyota Land Cruiser, Model 2008, Chassis No. JTECB01J301032994
12. Toyota Land Cruiser, Model 2008, Chassis No. JTEEV73J4000002043
13. Mercedes Benz Car (Protected) Model 2005, Chassis No. WDB-2201752A73693
14. Mercedes Benz Car (Protected) Model 2005, Chassis No. WDB-2201762A457073
15. Mercedes Benz Car (Protected) Model 2005, Chassis No. WDB-2201752A476036
16. Mercedes Benz Car (Protected) Model 2005, Chassis No. WDB-2201752A475123
17. Stretched Limousine Car (Protected) Model 2005, Chassis No. WDB-2201752A457643
18. Toyota Lexus Jeep (Protected) 2005, Model JTJHT00W633531475
19. Mercedes Benz Car, (Protected) Model 2005, Chassis No. WDB-2201762A457435
20. BMW 760LI, Model 2014 (Protected), Chassis No. WBAPH2070DY99223
21. Mitsubishi Lancer S/Saloon Model 1994, Chassis No. CSNBIRU00812
22. BMWX5 Jeep, Model 2016, Chassis No. WBAKR6206G0M99845
23. BMWX5 Jeep, Model 2016, Chassis No. WBAKR6204G0M99830
24. Lexus Jeep, Model 2006, JTJHT00W564013596
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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.
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FBR chairman agrees on abolishing withholding tax on raw materials
KARACHI: Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) on Saturday asked business community to provide list of raw material for reducing tax rates on import stage.
Addressing the business community at Karachi Chamber of Commerce and Industry (KCCI), Shabbar Zaidi agreed with the business community that there should not be withholding tax on import of raw material.
The KCCI members raised the issue that withholding tax rates ranging 3 percent to 6 percent were imposed on import of raw materials.
“Yes. There should not be withholding tax on raw material,” Zaidi said and asked the KCCI to provide list for taking action before the next budget.
Talking on Amnesty Scheme – 2019, the chairman said that the asset declaration scheme was clear and there was no ambiguity.
He said that the scheme would be part of the Finance Bill for formal approval from the parliament and it would be the same as promulgated through the presidential ordinance.
The chairman said that the rules were being formulated for intending declarants.
Shabbar Zaidi also talked about smuggling and misuse of tax concessions.
He said that tax relief may be given to small number of raw materials but it cannot be extended to all imported goods.
He said that Afghan Transit Trade was used for smuggling into Pakistan. “But there are other ways to import illegal goods into the country,” he added.
The chairman asked the business community that once they declare the smuggled goods were illegal for selling in the local market. “If the business community support and promise there will be no protest then the raids against illicit goods will be launched from tomorrow,” the chairman added.
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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.
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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.
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Black money invested in immovable properties allowed whitening at just 1.5 percent of tax
KARACHI: The government has allowed whitening of money investment in immovable properties at nominal income tax rate of 1.5 percent on declaration made by June 30, 2019.
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PTBA recommends eliminating 12 provisions of withholding tax in next budget
KARACHI: Pakistan Tax Bar Association (PTBA) has recommended abolishing 12 different provisions of withholding income tax in order reduce the cost of business.
The apex tax bar of the country in its tax proposals for upcoming budget 2019/2020 recommended rationalization of withholding tax regime and in the first step it suggested eliminating 12 withholding tax rates.
The PTBA said that withholding tax regime significantly impacts the taxpayers and Inland Revenue Officers (IRO) alike.
On one hand, the regime increases the cost of doing business for a taxpayer and, on the other hand, it forces IROs to devote numerous resources in monitoring of withholding taxes.
The monitoring of taxes’ goal can be achieved by out sourcing the professional auditor firm and ability of the officer may be used for other work.
Even with the best efforts of the IROs, it is practically impossible to plug all the leakages of taxes withheld and deposit into the national exchequer.
“Globally the withholding tax regime is only applicable to persons whose income is difficult to determine, easier to evade or more likely to cross national boundaries. Currently, in Pakistan, withholding tax regime has been made applicable to almost all the categories of taxpayers and nature of payment under 49 provisions of law been weaved into the indirect taxes,” the PTBA said.
PTBA recommended revamping and rationalize of Withholding Tax Regime in order to reduce cost of doing business, complexity in the taxation laws and leakages in tax collection.
As a first step, it recommended following provisions of law may be withdrawn in which no substantial revenue is being collected in the last three years and eight months of current fiscal year:-
Sr. No. Section Description 2018-19
[Estimated on the basis of actual up to March, 2019]2017-18 2016-17 2015-16 01 156B Withdrawal of balance under Pension Fund. 100 136 86 76 02 235A Domestic electricity consumption. 917 792 312 1,730 03 236B Advance tax on purchase of air ticket. 559 484 303 495 04 236D Advance tax on functions and gathering. 965 839 783 622 05 236F Advance tax on cable operators and other electronic media. 49 24 19 21 06 236J Advance tax on dealers, commission agents and arhatis etc. 136 123 123 109 07 236L Advance tax on purchase of international air ticket. 1,131 1,257 1,331 999 08 236Q Payment to resident for use of machinery and equipment.
644 619 328 174 09 236R Collection of advance tax on education related expenses remitted abroad 543 397 339 367 10 236S Dividend in specie. 3 20 452 623 11 236U Advance tax on insurance premium. 424 485 397 – 12. 236V Advance tax on extraction of minerals. – 0.1 – – Total – – – –
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Sales tax rate in Pakistan highest in region: ACCA
KARACHI: Association of Chartered Certified Accountants (ACCA) has said that the existing sales tax rate of 17 percent in Pakistan is the highest in the region.
The existing rate of Sales Tax at 17 percent is one of the highest in the region with an average of around 12 percent in Asia (15 percent in India and Bangladesh, 10 percent in Indonesia and just 6 percent in Malaysia), ACCA said in its tax proposals for budget 2019/2020.
Sales Tax should be used to broaden the tax base and not as a replacement of direct taxation.
In order to avoid the net negative costs for the economy, the rate should be brought down to single digit in a phased manner with a proposed reduction to 14 percent.
The association also recommended harmonization of inter-provincial and federal-provincial taxation for avoiding double taxation.
It said that the conflicts between various provincial revenue authorities and the federation are resulting in double taxation of services owing to the classification and jurisdiction disputes.
Also, standardizing the applicable rates while also reducing them could facilitate the businesses while also increasing the tax revenues simultaneously.
Similarly, the lack of inter-provincial harmonization also results in double taxation of services owing to the classification and jurisdiction disputes.
These issues should be resolved to create a business-friendly environment and facilitate the tax-payers.
Point of origination or deliverance of services can be agreed upon by all revenue authorities as the basis of classification and the resulting jurisdiction to resolve the major inconvenience to the taxpayers.
The ACCA highlighted the issue of adjustable input tax and said with the introduction of the STRIVE system resulting online matching of invoices, the chances of sales tax fraud and/or error have been minimized.
Therefore the current restriction of limiting the input tax adjustment to 90 percent (ninety percent) of the output tax is outdated and needs to be abolished.
This will be in line with the principles of fairness, equity and justice for all and help restore the confidence of businesses.
The association also pointed out revision of sales tax return and said this should be made easy and automated as with the STRIVE system in place, chance of tax fraud are minimized to the maximum possible extent as claimed by FBR.
It further pointed out that in line with the principles of fairness, equity and justice for all, the appeals should be heard by a person not under the administrative jurisdiction/influence of FBR.