KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday advised the government to reduce tax rates and broaden the tax base for achieving GDP growth at six percent during next two years.
(more…)Category: Trade & Industry
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Karachi Chamber organizes COVID vaccination facility
KARACHI: The Karachi Chamber of Commerce & Industry (KCCI) in collaboration with Red Crescent Society organized a daylong COVID-19 Vaccination Facility on Saturday, which was attended by scores of members, general public, managing committee members and the staff.
According to a statement issued, single dose Cansinobio vaccine recently introduced by the government for people above 30 years of age was given to visitors who appreciated numerous arrangements made at KCCI where people were being vaccinated in a pleasant and hassle-free environment.
President KCCI Shariq Vohra, while commenting on the occasion, stated that every single citizen of not just Karachi but the whole country must get themselves vaccinated at the earliest in order to save themselves and their loved ones from the life-threatening COVID-19 pandemic.
He also appreciated all the efforts being made by the Federal and Sindh Governments who were trying their level best to somehow contain further spread of COVID-19 pandemic but the public must also join hands and come forward to fight against the pandemic by getting themselves vaccinated as quickly as possible.
He particularly mentioned that the efforts made Senior Vice President Saqib Goodluck, Chairman of KCCI’s Health & Education Subcommittee Jawed Siddiq Mittiwala and Advisor Ateeq ur Rehman deserve to be applauded that resulted in setting up of an ideal vaccination center for a day at KCCI. “More such initiatives have to be taken under Businessmen Group’s policy of public service to not only serve the business and industrial community but also all the citizens of Karachi without any discrimination”, he added.
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Measures proposed to curb under invoicing by commercial importers
KARACHI: Pakistan Business Council (PBC) has recommended the authorities to take additional measures to stop massive under invoicing by commercial importers.
In its proposals for the budget 2021/2022, the PBC said that across the board massive under invoicing and dumping of imported products has been increasing.
Information regarding values at which various custom check posts clear import consignments is not publicly available.
This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues.
There are massive leakages in the Afghan Transit Trade (ATT) and smuggled goods are being openly sold in all major shopping centers of the country.
Customs however is not willing to act against smuggled products citing lack of cooperation from local authorities.
The PBC recommended the following:
a) Values at which import shipments are cleared through PRAL or CARE need to be publicly available.
b) The Government of Pakistan must insist of Electronic Data Interchange (EDI), for both FTA and non-FTA imports from China. In future the requirement of EDI should be made compulsory for imports from FTA / PTA partner countries.
c) Depending on industry, the Import Trade Price (ITP) be fixed e.g. on the basis of country of origin, weight, volume etc. after discussion with stakeholders. ITP’s may be fixed for most items prone to mis-declaration such as consumer goods and margins of commercial importers be monitored to assess the value of subsequent supply of imported goods. A certificate to this effect should be issued by auditors of commercial importers.
d) For items, prone to under invoicing and mis-declaration, FBR should designate one or two ports (including the dry ports) for clearing of import consignments. This will allow better monitoring of the import consignments where chances of mis-declaration are on a higher side.
e) Additionally, the old Customs General Order 25 needs to be revived with a provision that local manufacturers be given the option to buy at a 15% premium, any consignment which appears undervalued.
f) Taxes and duties deposited by local manufacturers and commercial importers should be published.
g) The rate of tax collected from commercial importers be increased by at least by 2%. Presently, tax collected from commercial importers is treated as Final Tax.
In order to avoid burdening of genuine commercial importers, we would recommend that the income tax collected at import stage be treated as an advance tax.
h) In order to allow commercial importers to claim adjustment of taxes deducted at import stage, commercial importers should be asked to present certificate from auditors that at least 70% of imported items have been exported or sold to registered manufacturers. This will also help increase the overall tax base.
i) Monthly sales declared by commercial importers should be matched with sales declared in annual income tax return as well as the credit entries in all business bank accounts. In case of any discrepancy, a reconciliation with justifiable reasons should be submitted by the commercial importers
j) Online CREST system must be amended in a way to trace sales along with value addition thereon of person to whom supplies were made by Commercial importers.
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Third party to conduct tax audits: Shaukat Tarin
KARACHI: Finance Minister Shaukat Tarin has announced that tax audits to be done by third party. Further it has been decided to launch universal self assessment scheme (USAS).
“I want to remove harassment by FBR. Although there are good people at FBR but there are also some troublemakers. Hence, we have agreed upon Universal Tax Self-Assessment and the audits by third party only,” he added while speaking at an online meeting with BMG Leadership and KCCI Office Bearers on Thursday.
A statement issued by the Karachi Chamber of commerce and Industry (KCCI) on Thursday quoted Shaukat Tarin that if any wrongdoing was found after the audit by third party, it will result in initiation of investigation and punitive action.
“In this regard, we have created a section to review all the bills, number of deposits and travel history etc. of individuals and if any person is found liable to pay taxes but is a defaulter, such cases will be sent to third-party auditors to prove tax default and if proven, these defaulters will be put behind bars,” Tarin said, adding that laws will be devised to put such persons behind bars responsible for willful default.
He stated that the government was focused on rationalizing the turnover tax in order to make some sense as it varies in numerous cases.
The minister also agreed that when three percent penalty was being charged in case of unregistered persons, the CNIC condition should not be there. Hence, the minister directed FBR to look into this matter and stop demanding CNIC.
“A call center will also be established at FBR in which complaints can be lodged which I will personally review on daily basis to ensure accountability at the FBR,” he added.
In response to concerns expressed over dilapidated infrastructure of Karachi, Shaukat Tarin informed that a three years package of Rs900 billion has been allocated under PSDP for Karachi which will be finalized by the PM.
“During discussions on this allocation at a meeting which will be presided over by the Prime Minister, I will definitely raise business community’s concerns and I will be your promoter.”
He said that the government was trying its best to facilitate the SMEs and, in this regard, the SMEs falling under the bracket of Rs2 million will be provided ‘clean credit’ facility with no security. For this purpose, the government will be providing huge amount of funds to banks at 8 percent which will be given to SMEs at 9 percent while credit insurance will be provided by the government. “It is a matter of grave concerns that out of a total of 6 to 8 million SMEs, only 180,000 SMEs have access to credit, hence efforts will be made to extend credit facility to at least 1 million SMEs in the next two years.”
He said that FBR will also be directed not to stop refunds of SMEs and small businesses. “We will clear all the backlog of refunds within a few months by issuing Tradeable Bonds so that the businesses could have sufficient amount of liquidity available with them and a smarter mechanism will be introduced to clear refunds within 60 to 90 days.”
Referring to concerns expressed over Rs58 billion refunds pending under DLTL scheme, Shaukat Tarin termed it as ‘a very good point” and directed FBR expedite the refunds while DLTL should not be collected this year as the FBR already owes huge amount.
Commenting on a suggestion to treat indenters commission as export proceeds, the Finance Minister said that it was a very good idea to consider indenters’ commission as export proceeds as it has been observed that many indenters prefer to keeping their earnings outside the country but if these earnings were treated as export proceeds, it would encourage them to bring funds to Pakistan.
He said that reforms were being introduced at the revenue side which will ensure that no harassment takes place and there will be no double taxation. “The IMF has been pushing us to stop all exemptions and impose additional tax of Rs140 billion on existing taxpayers which I denied”, Shaukat Tarin said, “Only blatant exemptions will be dealt otherwise the rest will continue. We are broadening the tax base by making good use of technology and innovation which will neither be coercive nor regressive but will be devised in consultation with the business community.”
Finance Minister also assured to regularly hold meetings with KCCI at least once in three months so that dialogue on an ongoing basis continues to promptly resolve business community issues while the FBR will be directed to consider and resolve all the technical issues being raised by KCCI.
Speaking on the occasion, Chairman BMG Zubair Motiwala pointed out that despite the outbreak of COVID-19, Karachi has given 18 percent growth in exports and it overall exports stood at 58 percent therefore, the Federal Government must take Karachi’s robustness into consideration and accordingly give its due share which has unfortunately not been given so far.
He said that although a subsidy was earmarked for Karachi’s energy needs but as per Ministry of Energy, the earmarked amount exhausts by paying for uniform tariff across the country and no amount is left to give subsidy for gas at 6.5 dollars per MMBtu to the five export-oriented sectors. The subsidy does not account for the Hydel electricity portion which is given to KE as a right of Karachi over Hydel Power. If the same is calculated at the cost of hydel electricity, then this subsidy can automatically be saved and given for the sale of gas at 6.45 per MMBtu to the five export-oriented sectors.
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Massive rise in withholding tax rates proposed for non-filers
KARACHI: The concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy. However, no efforts were made to increase the tax base.
Pakistan Business Council (PBC) in its proposals for budget 2021/2022 submitted to the Federal Board of Revenue (FBR), said that though large amounts are being collected from non-filers, no effort has been made to increase the tax base.
“The non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers.”
In order to broaden the tax base and to achieve increase in overall tax collection without burdening existing tax payers, the policy to increase tax on non-filers / unregistered persons should be implemented specifically in the following cases:
a) unregistered industrial / commercial entities (not having STRN) having bill amount in excess of Rs. 20,000 per month, extra sales tax should be increased from 5 percent to 20 percent
b) After collection of extra tax as referred above for a continuous period of 6 months, all these connections should be provisionally converted into NTN and STRNs and return filings from these connections should be enforced.
c) In case of provisional registration as above, utility companies be directed to issue show cause notices where annual billing amount exceeds Rs.2.4 million and directing provisionally registered persons to obtain permanent registration. In case of non-compliance, utility companies be directed to disconnect utility connections.
d) Moreover, in order to bring all commercial / industrial users in the tax net and to verify filer status, Electric distribution companies should provide one year to all such consumers to get their NTN registered with electricity distribution companies. In case of failure to provide NTN, electricity connection should be disconnected. Considering the fact that all industrial / commercial connections will be linked with NTN, the tax department will then be in a better position to assess the electricity consumed by commercial / industrial users and corroborate the same with amount of sales / production etc. reported in sales tax / income tax return.
e) In order to bring all commercial / industrial users in the tax net and to verify filer status, Electric distribution companies should provide one year to all such consumers to get their NTN registered with them. Thereafter, such commercial/industrial consumers without NTN should be charged advance income tax @ 30 percent (from existing 12 percent) on their utility bills. Those with NTN but non-filer status be charged at 20 percent WHT.
f) Residential consumers be made liable to provide NTN in case electricity bill amount exceeds Rs.1.2 million per year or levy advance income tax withholding of 20 percent.
g) All exemptions (like exemption on agricultural income) under the Income Tax Law should only be made available to filers so that exempt income is also reported and wealth is reconciled.
h) Withholding tax on International business class tickets under section 236L is same Rs. 16,000 for filer and non-filer, it should be increased to Rs. 50,000 for non-filers.
i) Withholding tax @ 5 percent or Rs. 20,000, whichever is higher, is applicable under section 236D on all functions organized by filers as well as non-filers. Rate of withholding be increased for non-filers to Rs. 100,000 as minimum and no WHT from filer
j) Function halls withholding tax on electric bills should be 30 percent which can be adjusted against tax liability by providing proof of tax deducted from their customers.
k) Withholding income tax on interest income u/s 151 is 15 percent for filer and 30 percent for non-filer. Rate should be increased to 50 percent for non-filers in case interest income is more than Rs.2,000,000/-
l) Annual private motor vehicle tax u/s 234 for non-filers is Rs. 9,000 for 1600cc-1999cc and Rs. 20,000 for 2000 cc and above. Rate for non-filers should be increased to Rs. 50,000 for 1600cc-1999cc and Rs. 200,000 for 2000 cc and above
m) Advance income tax is collected on sales of immovable property under section 236C, which is 1 percent for both filers and non-filers, should be increased for non-filers to 10 percent for properties of 900 square yards or more
n) Holding of land by non-filers should be made more expensive by asking those authorities collecting property tax (cantonment boards / societies / registrar) to collect adjustable advance income tax, from non-Filers, on behalf of the Federal Government as follows:
o) Rs. 500,000 per year for 800 yards or more but less than 1800 yards
p) Rs. 1 million per year for 1800 yards and above.
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Under-invoicing by commercial importers destroying industry: PBC
KARACHI: The Pakistan Business Council (PBC) has informed the higher authorities that the massive under-invoicing, especially by commercial importers, is destroying domestic industry.
In its proposals for budget 2021/2022 the PBC pointed out that across the board massive under invoicing and dumping of imported products has been increasing.
Information regarding values at which various custom check posts clear import consignments is not publicly available.
This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues.
Values at which import shipments are cleared through PRAL or CARE need to be publicly available.
The Government of Pakistan must insist of Electronic Data Interchange (EDI), for both Free Trade Agreement (FTA) and non-FTA imports from China & other major trading partners China & other major trading partners.
In future the requirement of EDI should be made compulsory for imports from FTA / PTA & major trading partner countries.
The rate of withholding tax on imports for commercial importers should be at least 2 percent higher than what it currently is and the Withholding tax should be considered as an adjustable advance tax.
Valuation Ruling should be issued in consultation with Brand owners, i.e., who have valid registration of the brands under relevant intellectual property laws.
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FBR urged to restore group tax laws in actual form
KARACHI: Pakistan Business Council (PBC) has urged the Federal Board of Revenue (FBR) to restore laws related to group taxation in the initial form as introduced via Finance Act 2007 and Finance Act 2008.
In its proposals for budget 2021/2022, the business council said that most recently, via Income Tax Laws (Second Amendment) Ordinance, 2021, exemption from the levy of tax on intercorporate dividend between companies eligible under section 59B of Income Tax Ordinance, 2001 (Group Relief) has been revoked.
The PBC proposed group taxation laws should be restored in its initial form as introduced via Finance Act 2007 and Finance Act 2008.
Specifically, the following is being proposed:
Clause 103C of Part I of Second Schedule of ITO, providing exemption from Intercorporate Dividends to group companies eligible under section 59B of the ITO, should be reinstated.
Amendments made in Clause 11B of Part IV of Second Schedule via Finance Act 2015 and Finance Act 2016, should be revoked to ensure exemption from withholding tax is provided on intercorporate dividends exempt under clause 103A and clause 103C of Part I of Second Schedule of ITO.
Through Finance Act 2016, a restriction was introduced by insertion of sub-section 1A in section 59B of ITO such that the surrender of losses is now restricted to the percentage of shareholding. This amendment is against the intent of the legislation and it is recommended that sub-section 1A and its references in section 59B should be removed.
Condition of Group Return Filing introduced in Clause 103A Part I of Second Schedule of ITO Via Finance Act 2015 to claim exemption on Intercorporate Dividend between wholly owned entities (eligible under section 59AA), should be removed.
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Business Council identifies anomalies in minimum tax regime
KARACHI: Pakistan Business Council (PBC) has identified anomalies in minimum tax rates and demanded the levy should be abolished.
In its budget proposals for 2021/2022 submitted to the Federal Board of Revenue (FBR) the council said that the rate of minimum tax of 1.5 percent is extremely high and unrealistic.
It identified that as per the judgment of the Sindh High Court in case of Kassim Textile, carry forward and adjustment of Minimum turnover tax is not allowed in cases where the taxpayer reports loss. On the other hand, Lahore High Court, in case reported as 2019 PTD 1994, minimum tax, even in case of loss year, is allowed to be carried forward for adjustment.
Income Tax Law prescribes that ‘income’ of the Zone Enterprise (located in Notified SEZ) is exempt from tax for 10 years. However, no explicit exemption is provided from Minimum Tax (payable under section 113 of the Income Tax Ordinance, 2001) to Zone Enterprises. SEZ Act, 2012 is a special law governing SEZs and Zone Enterprises granting exemption from all income taxes (which include Minimum Tax also), however, due to ambiguity, tax department does not allow exemption from minimum tax to entities operating in SEZ.
Section 65D/65E of the Income Tax Ordinance, 2001 provides exemption for 5 years from all income taxes [including minimum tax and final tax] to company formed for operating a new industrial undertaking. On the other hand, no such benefit has been provided to an existing company investing for Expansion or extension to achieve benefits of large-scale manufacturing
Therefore, the PBC proposed that in order to promote industrialization, Minimum tax should be abolished for all listed companies as these companies are subject to stringent regulations and audit. For other companies, rate of minimum tax be reduced gradually by 0.2% on an annual basis so that by Tax Year 2025 the rate is 0.5%.
Moreover, in order to streamline the mechanism of carry forward and adjustment of Minimum tax, minimum tax should also be allowed to be carried forward for adjustment in subsequent years even in case of losses.
Exemption from minimum tax to all companies operating in SEZ In line with the tax credits under sections 65D/65E, in order to achieve economies of scale to compete with international suppliers, allow exemption for 5 years from all income taxes [including minimum tax and final tax] on income generated from expansion / extension / BMR projects by an existing industrial undertaking subject to the condition that the minimum investment in such extension / expansion project should not be less than $15 million
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PBC suggests rationalizing sales tax regime
KARACHI: Pakistan Business Council (PBC) has suggested rationalizing sales tax regime as higher standard rate of 17 percent is discouraging documentation.
In its proposals for budget 2021/2022, the PBC said that the high standard tax rate of 17 percent has led to low registration of less than 200,000 while income tax filers are about 2. 8 million.
Moreover, Tier 1 retailers engaged in the business of finished fabric, and locally manufactured finished articles of textile, textile made-ups, leather and artificial leather are allowed reduced sales tax rate of 12 percent, if their sales transactions are integrated with the FBR system.
Unfortunately, several income taxpayers are not willing to register owing to high rate and even retailers are not interested in implementing the POS integration as high rate of 12 percent is not attractive, in addition to other issues.
The Standard rate and POS rate be gradually reduced by 1 percent per year to attract to encourage the unregistered taxpayers to become registered and avail benefits of input adjustment.
This will increase the documentation of the economy and create a level playing field for the registered taxpayers.
It is proposed that Section 3(1A) should be rationalized and further tax should not be applicable if:
a) Buyer in not required to be registered under Sales Sax Act 1990;
b) Buyer holds FTN; Buyer, being service provider, is registered under respective provincial authority
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Pakistan customs assures early disposal of valuation ruling issues
KARACHI: Pakistan Customs has assured business community of early resolution of pending valuation ruling issues on priority basis.
Director General Customs Valuation Ms. Shahnaz Maqbool assured this at a meeting held with members of Pakistan Federation of Chambers of Commerce and Industry (FPCCI), a statement said on Thursday.
According to the statement the FPCCI and Pakistan Customs had agreed in principle to form an advisory committee to resolve issues pertaining to valuation through consultation.
DG Customs Valuation Ms. Shahnaz Maqbool in a meeting held at Federation House agreed with the various recommendations of Shabbir Mansha Churra – Convener, Central Standing Committee on Customs, FPCCI – and his team.
The DG also assured of expeditious disposal of cases pending for many years related to valuation rulings. Former President FPCCI Mian Anjum Nisar; VPs FPCCI Hanif Lakhany and Adeel Siddiqui; Former VP Khurram Ejaz and others were also present on the occasion.
Shabbir Mansha Churra drew the attention of DG Valuation to the growing issues related to valuation rolling; and, said that for strong liaison between FPCCI and Customs, it was necessary to form a Joint Advisory Committee.
The committee will have representatives of the concerned stakeholders/associations; and, their legal and business experts.
Mian Anjum Nisar, Former President FPCCI, pointed out that the business community was facing severe problems due to delays in valuation ruling and because of very old valuation business community have to pay extra charges; although, the valuations have come down due to the reduction in the prices of some items.
But, the business and trade community still have the old rates and it calls for a swift and comprehensive process to update valuation ruling.
FPCCI demands that businesses that are in appeals with customs valuation should be facilitated by the department on priority basis and resolutions offered.