The Karachi Chamber of Commerce and Industry (KCCI) has called upon the Federal Board of Revenue (FBR) to address challenges in the business registration process, emphasizing the need for streamlined options in the IRIS registration form.
(more…)Category: Trade & Industry
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Yarn traders demand restoring turnover tax rate at 0.1pc
KARACHI: Pakistan Yarn Merchants Association (PYMA) has informed the Federal Board of Revenue (FBR) that present turnover tax rate for yarn traders is very high and many traders may resort to shutdown their factories at this high rate.
Farhan Ashrafi, Vice Chairman of Pakistan Yarn Merchants Association(PYMA) & convener FPCCI’s Central Standing Committee on Yarn Trading and Khurram Bharaa, former SVP, have demanded Muhammad Javed Ghani, Chairman Federal Board of Revenue (FBR) to withdraw 1.5 turnover tax imposed on yarn traders and restore the previous rate of 0.1 percent.
“Otherwise, the majority of yarn traders will be forced to close their businesses, which are already badly affected by the Corona epidemic and are facing severe financial crunch.”
A letter to FBR chairman, Farhan Ashrafi informed that PYMA members, who are yarn traders have brought attention towards this important issue, as they were doing business in large volume but unfortunately at nominal rate of profit margin which is 1pc even less.
By virtue of SRO.333 (I) 2001 dated 02.05.2011, the traders of yarn had been subject to turnover tax at concessional rate 0.1pc, which constitutes about 10pc of their margin. Provision of rate of minimum tax 0.1pc was made under clause 45 (A) second schedule to the income tax ordinance 2001.
“Because of some oversight traders of yarn were not included in the purview of minimum tax under the first schedule Part-1 (Division IX) of the Income tax ordinance 2001, which would be the correct approach to treat the levy of concessional rate on yarn traders, as is the case with various other sectors and persons”, they added. Due to this lacuna a state of confusion remains about the levy of tax and frequent changes are made in the rate of turnover tax without consultation with stakeholders.
Khurram Bharaa said that to compound the misery of yarn traders an amendment was made through Finance Act 2020, whereby Yarn Traders have been taken out of the scope of clause 45A (Part IV of 2nd Schedule) and the exemption from application of minimum turnover tax under Section 113 has been withdrawn, which prescribes 1.5pc turnover tax.
Accordingly, the yarn traders are how subject to turnover tax at the rate of 1.5pc, which is way above their actual margin. Consequently, many traders of yarn have to discontinue their business unless the previous rate of 0.1pc is restored.
Farhan Ashrafi asked to FBR chairman to remove the anomaly by insertion of the provision of minimum turnover tax at 0.1pc for the yarn traders in the first schedule Part-1 Division IX (exempting yarn traders from minimum 1.5pc tax under section 113 of income tax ordinance 2001).
He requested Javed Ghani for intervention in the matter will help to rescue the complaint tax-prayers, who are conducting a large volume of trade and sustaining the textile sector of Pakistan.
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Foreign investors propose abolishing FTR, adjustable all withholding tax provisions
KARACHI: Foreign investors operating in Pakistan have suggested the government to abolish Final Tax Regime (FTR) and make all provisions pertaining to withholding tax as adjustable.
In its proposals for budget 2021/2022, the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday said it had submitted comprehensive taxation proposals for the Federal Budget 2021-2022 which highlight various measures required to streamline the complex tax regime, incentivize the legitimate tax payer through Ease of Doing Business measures and ensure filing of tax returns by all income earners.
Commenting on the Taxation proposals , Irfan Siddiqui, OICCI President, acknowledged that the government has taken various bold measures in the face of many economic challenges, including those emanating from the Covid 19 impact on the local and international trade and business”.
Irfan Siddiqui added: “OICCI members are fully conscious that the continuing spread of Covid-19 poses exceptional challenges to the government and have therefore decided not to seek a number of taxation relief measures which, under normal circumstances, would have been justified to boost FDI and align Pakistan to compete with other regional countries.”
OICCI has strongly recommended that the Minimum Tax regime should be rationalized with a lower level general tax rate and immediately reduced to 0.2 percent for certain industries, like oil refining and oil marketing companies, with high turnover and low/government regulated margins.
“Moreover, Withholding tax regime (WHT) with over 45 rates is cumbersome and needs to be immediately rationalized to 5 rates for filers. Final Tax regime should be abolished and all withholding taxes should be made adjustable. FBR should ensure that all those persons who have been subjected to withholding taxes should file regular tax returns.”
OICCI Secretary General , Abdul Aleem , giving further details of the key Taxation proposals from the chamber highlighted the need to introduce one unified Sales Tax rate of 13 percent, as applicable in Sindh, and one common tax return form throughout the country, filing of a single tax return with FBR instead of separate ST returns to the authorities in every province. He also stated Income Tax rebate of 2 percent for Shariah Compliance investment have not been effective and the intent of the regulators will not be realized until these are aligned with SECP Shariah regulations.
M. Abdul Aleem also stated that OICCI has recommended for substantial increase in FED on unmanufactured tobacco to arrest massive tax evasion in the tobacco industry. This together with introduction of Track and Trace Monitoring system will boost FBR revenue significantly. OICCI also proposed introducing stringent controls and penalties for illicit trade across the whole value chain. Pending review and revision of Afghan Transit Trade agreement (ATTA) , there is need to harmonize duty and tax rates to remove incentive for duty evasion.
Highlighting the need for Ease of Doing Business and promoting tax culture in the country , OICCI has recommended that the Tax regime should be simplified with massive reduction in the number of tax payments and filing of various forms/returns. Pending tax refunds should be settled withing 45 days and inter-adjustment of income/sales tax refunds be allowed in the law.
In line with the latest focus in the country on digitization of the economy, FBR and associated tax authorities need to substantially upgrade their use of digital technology, data analytics, including Artificial Intelligence tools to effectively use a strong data base already available in the country from NADRA and other documented sources so as to ensure that all income earners regularly comply with the tax requirements.
In conclusion, Abdul Aleem observed that OICCI members believe in the potential of Pakistan , despite challenges, which can be harnessed with positive and regular engagement of relevant authorities and private sector.
There is need to continuously improve and align policies and practices in Pakistan with the best in the region, to be able to attract sizeable FDI in the manufacturing , IT and services export and other job creating sectors.
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Karachi Chamber welcomes appointment of Hammad Azhar as Finance Minister
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday welcomed the government decision to appoint Hammad Azhar as the finance minister of the country.
Chairman Businessmen Group (BMG) & Former President KCCI Zubair Motiwala and President KCCI Shariq Vohra, while warmly welcoming the appointment of Hammad Azhar as Federal Finance Minister, stated that the business & industrial community of Karachi highly appreciates and fully supports Prime Minister’s prudent decision and hopes that the newly appointed Finance Minister would take necessary practical steps to deal with some of the major economic crises being faced by the country.
In a joint statement, Chairman BMG and President KCCI pointed out that Hammad Azhar will have to devise effective strategies on war-footing basis to deal with the menace of inflation which has terribly affected the lives of entire population, besides taking practical steps to bring down the exorbitant cost of doing business.
Uncertainty continues prevails in every nook and corner of the country as the COVID-19 pandemic still remains largely active and the overall situation, which was already very challenging, has been worsening day by day. It seems that the third spell of the deadly virus was more dangerous and it has triggered a lot of anxiety amongst various businesses therefore, the next budget has to be declared as a “Relief & Rescue Budget”, they added.
They opined that this change at the helm of affairs at the Ministry of Finance just ahead of budget has triggered some anxiety amongst business community and was likely to create a challenging situation hence, the government will have to take confidence building measures by taking the Karachi Chamber on board in the policy making process whether it was pertaining to SBP’s autonomy, budget making or any other taxation related issue.
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FBR urged to remove CNIC condition on sales up to Rs100,000 by distributors
KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw condition of CNIC on supplies made by distributors to unregistered persons on sales up to Rs100,000.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 stated that under section 23(1)(b) of the Sales Tax Act, 1990 exclusion has been provided to retailers, whereby retailers supplying taxable goods to unregistered persons are not required to mention the CNIC unregistered customers, wherein the transaction value inclusive of sales tax does not exceed Rs.100,000.
Due to the present provisions of the law, the distributors are facing a dilemma whereby small retailers are purchasing taxable goods valuing Rs.100,000 from mega stores (retailers) in order to avoid the requirement of providing the CNIC, resulting in loss of business for the Distributors who normally used to sell goods to such small retailers
The KCCI proposed that FBR should extend similar exclusion of Rs.100,000 to distributors as well.
Giving rationale, the KCCI said that it will help ease of doing business thereby resulting in enhancement of tax revenue.
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FMCGs should be excluded from tax collecting agent
KARACHI: Federal Board of Revenue (FBR) has been urged to amend laws to exclude manufacturers of fast moving consumer goods (FMCGs) from application of withholding tax under Section 236G and 236H on Income Tax Ordinance, 2001.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022, stated that manufacturers of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam etc., collect advance tax at 0.1 percent for persons appearing on Active Taxpayers List (ATL) and 0.2 percent for non-ATL and 0.5 percent for ATL and 1 percent for non-ATL of gross of amount of sale to distributors, dealers, wholesalers and retailers.
Most of the goods mentioned above are not fast moving consumer goods. The only FMCG is beverages on which the section 236 G & H are unjustly applied.
This tantamount to discrimination for beverage manufacturers being the only manufacturer of FMCGs manufacturer class liable to above tax.
It is not practically possible for manufacturer of FMCGs to collect income tax from dealers, distributors, wholesalers and retailers and it adds to the cost of consumer products.
The KCCI proposed that the section may be appropriately amended to exclude the manufacturers of FMCGs from being collecting agents under section –236 G & H of the Ordinance.
The chamber said that it would relieve the unjust burden of tax on consumer goods and enable manufacturers of FMCGs to pass the benefit to end-consumers.
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FBR suggested to abolish multiple audit provisions
KARACHI: The Federal Board of Revenue (FBR) has been suggested to abolish multiple provisions of audit under Income Tax Ordinance, 2001 and simplify procedure for ease of doing business.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 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 re-open the Audit of any person or firm at will on unsubstantiated grounds. SEC.177 SUB-SECTION 4: 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 KCCI said that revenue collection through such recovery proceedings is hardly Rs.92.0 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 chamber 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 Tax Payers 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.
Giving rationale the KCCI said that 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. This will also help in broaden tax base by restoring confidence in the system.
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Commercial, industrial utility connections must be brought into tax net
KARACHI: Federal Board of Revenue (FBR) has been urged to bring all persons having industrial and electricity utility connections into tax net to ease tax burden on existing taxpayers.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2021 said that currently the taxpayers and filers of income tax returns, particularly industrial entities are overburdened with multiplicity of taxes.
Overburden of taxes on already registered taxpayers is depriving them of level playing field and business viability against non-taxpayers.
The chamber proposed that all the entities engaged in business having commercial and industrial utility connections but are out of tax base should be brought to tax-net making them taxpayers and filers.
According to NEPRA Industry Report 2019 and FBR Tax Directory Data 2018, the number of commercial and industrial consumers is higher as compared to registered Tax Payers with a huge difference, who must be brought into tax-net as they are commercial and industrial entities but out of tax-net.
The chamber said that it would ease down the burden of taxes over registered taxpayers and shall also broaden the tax base resulting to further documentation of economy.
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FBR urged to lower duty, tax on import of motorcycle spare parts
KARACHI: Khalid Waheed chairman All Pakistan Importers & Dealers Association appeal to the FBR to lower the custom duties and withdraw the addition custom duty on the commercial import of motorcycle’s spare parts.
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Tax exemption withdrawal ahead budget to adversely affect trade, industry
KARACHI: The apex trade body of the country has expressed reservations over withdrawal of tax exemptions ahead of federal budget 2021/2022 and said that it will adversely affect trade and industry.
Mian Nasser Hyatt Maggo, President of Federation of Pakistan Chambers of Commerce and industry (FPCCI) in a statement on Sunday said that under the prevalent difficult condition of COVID-19, the pre-budget withdrawal of number of exemptions will affect trade and industry negatively, which is based on planning of fiscal based promised position for year up to June-2021.
“Such non predictability is against the sustainable growth of business economy and encroaches upon ease of doing business,” he said.
He was referring to the Tax Laws (Second Amendment) Ordinance, 2021 dated March 24, 2021.
While expressing concerns over the amendments before budget, he said that FPCCI has already suggested that the amendment should be made only with prior consultations with, to be affected stakeholders with sufficient time space to prepare the future plan of the left out period up to June-2021.
The outcome of consultations of both public and private sector may have otherwise trimmed the contents of the ordinance in the business economy interest, equally important for government in terms of goodwill and believe in consultations with private sector.
He further said that the business sector is already facing tight restrictions as per IMF program conditionality, much being agreed amongst stakeholders as originating implementation directions concurred by public sector without any reference to the negotiations with private sector.
The amendments were introduced through the Tax Laws Amendment Ordinance, 2021 issued through presidential Ordinance to amend 76 corporate income tax exemptions and allow tax credit facility from March 24, 2021.
The tax credit facility has been extended to industrial undertakings; charitable organizations and IT export services. Under the Ordinance, 100 percent tax credit would be allowed to the IT services or IT-enabled services after fulfillment of certain conditions including the filing of returns/withholding tax statements.
President FPCCI further stated that withdrawal of exemptions in lieu of extending credit facilities is a measure which gauges the poor performance of FBR up till now and hence the collection targets are finding the only priority and it appears that FBR is running on a bad doctrine that more tax collection will improve the growth of economy, to which we disagree in absolute terms.
President FPCCI Mian Nasser Hyatt Maggo also said that the newly promulgated Ordinance 2021 is also limiting the charitable activities by allowing restricted number of such institutions and placed them under newly introduced 13th schedule for Section 61 of the Income Tax Ordinance.
President FPCCI said that we are not following the successful tax models which are based on reducing the tax rates and extending the facilities to be affecting the increase in tax collections, rightly agreed by the apex body that Laffer curve will result in maximum tax revenue for government by cutting taxes in certain circumstances that would allow governments to cut the taxes and simultaneously increase revenue and economic growth.
President FPCCI said that public sector negotiating with IMF in exclusion of participation of apex body representing private sector trade, industry and service sector is dictatorial impositions of decisions negatively affecting the business and its growth for reducing the fiscal deficits, a prime objective we believe is being asked for by IMF.
He further said that country like US during the period of Ronald Reagan, 40th US President, the tax cuts resulted in doubling the tax from USD 500 Billion to Dollar 01 Trillion. The Georgian politicians and businessmen together in the reforms reduce the number of taxes to 1/3rd and reduce the national tax burden to quarter of a GDP resulted in doubling the percentage of taxes from 13 percent to 25 percent of GDP.
He further said that the case of India is no exemption wherein single GST increase the GST registrations by almost 100 percent.
“We are not learning any lesson from the available examples of tax reforms and what we are marching towards is to hide our inefficiencies in tax administration by withdrawing the exemptions, imposing RDs, ACDs and taking all the measures which has made the whole taxation structure full of the anomalies,” he said, adding that the government should think about that if either the economy will generate taxes or imposition of increase in taxes will generate growth of the economy.