Pkrevenue.com

Category: Trade & Industry

This section covers news on trade and industry. Pakistan Revenue is committed to providing the latest updates on business trends.

  • Return, wealth statement be made mandatory for Rs2 million turnover in banking system

    Return, wealth statement be made mandatory for Rs2 million turnover in banking system

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has suggested that persons having annual turnover of Rs2 million through bank accounts should require filing annual returns and wealth statement.

    The OICCI in its proposals for budget 2020/2020, said that Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) should devise a framework to ensure all customers of financial institutions whose account shows turnover in excess of Rs2 million or more during the year, have filed a tax return and wealth statement.

    “This could be done by the financial institutions simply notifying names/ CNIC numbers of such customers to FBR without giving access to bank accounts,” the OICCI added.

    The OICCI recommended the following for broadening of tax base:

    FBR should urgently implement the recommendations of the Tax Reforms Commission (TRC) and also hold regular round table conferences with leading tax and legal experts to review existing laws for increasing the number of tax payers and taxable entities.

    Tax authorities should use technology, data analytics including Artificial Intelligence tools and make better/effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “Filers”, with submission of annual income tax/ wealth returns and wealth reconciliation statements.

    Art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis.

    Once the FBR receives the above information, it should be pro-active and pursue potential tax payers by sending them income tax return forms requiring them to file tax returns – rather than waiting for the tax returns to be filed.

    ‘The Protection of Economic Reforms Act, 1992” which has been amended in 2018, should be further reviewed to curb the practice of remitting undeclared income through unofficial channels outside Pakistan and the same being brought into Pakistan through banking channels in Foreign Exchange, thereby “whitening” the unexplained money at a minimal cost.

    Section 111(4) of ITO 2001, which has also been amended in 2018, should be further reviewed to restrict tax free inward foreign remittances to immediate family members only.

    Eliminate culture of Amnesty Schemes as it discourages the honest tax payers. viii. Severe, and visible, penalties should be levied to punish tax evaders, starting with evasions of over Rs 1 million.

    As Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which became operational from September 2018, regular coordination should be done with relevant authorities of countries, considered as tax heavens for stashing away illegal wealth, for information sharing.

    Appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any kind of assets outside the country for which source of income could not be established.

  • Independent appellate recommended to boost taxpayers’ confidence

    Independent appellate recommended to boost taxpayers’ confidence

    KARACHI: Business community has recommended to establish an independent tax appellate system in the country to boost taxpayers’ confidence and discourage irrational assessments.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for fiscal year 2020/2021 recommended to establish the independent tax appellate system to boost taxpayer’s confidence and discourage irrational assessments by the tax authority driven by revenue collection targets.

    Due to immense delays in conclusion of disputes by the appellate authorities and fear of financial exposure arising from recovery proceedings by FBR, taxpayers have to resort to the High court to cover their financial exposure.

    The first appellate authority Commissioner Appeals come under the direct administrative control of FBR whereas the second appellate authority Appellate Tribunal Inland Revenue comes under the administrative control of the Ministry of Law.

    There is a need of major reforms in the tax appellate process to expedite resolution and ensure fairness in the process.

    The OICCI recommended:

    i. Tax appellate forums should come under the direct supervision of High courts and should be independent of FBR.

    ii. Professional Tax adjudicators should be appointed in the process with clear tasks of rapid disposal of cases.

    iii. Recovery proceedings should not be initiated until tax assessments have passed at least one independent forum.

    iv. Decision should be made within 60 days of the filing of the response.

  • Various tax laws discouraging investment: PBC

    Various tax laws discouraging investment: PBC

    KARACHI: Pakistan Business Council (PBC) has detected that various tax laws are discouraging investment in the country. The council recommended measures for promoting industrialization, growth and job creation.

    The PBC in proposals for budget 2020/2021 said that at present, new local/foreign investors are reluctant to invest in manufacturing industry of Pakistan due to various impediments including collection of sales tax (10 percent upfront plus 3 percent minimum value addition plus 7 percent Postdated cheques) and income tax 5.5 percent at import of plant and machinery/ spare parts in addition to various other taxes and levies thereafter.

    The PBC proposed new entry number 1(viii) be inserted in column number 2 of the Table specifying rate of tax at import stage as given in Part-II of the 1st Schedule to the Income Tax Ordinance, 2001 as follows:

    “(viii) industrial undertakings importing Plant and Machinery and spare parts”

    The PBC further said that the current rate of minimum tax is 1.5 percent, this tax on turnover is impacting the sustainability of industries especially in the light of current crises.

    The provision under which the minimum turnover tax is charged, both for manufacturing and services sectors should be suspended for at least the next two financial years.

    As income of SEZ entity (Zone Enterprise or operator) is exempt from income tax for a period of 10 years, there should not be any withholding of Income tax at source at any stage for Zone Enterprises and under any provisions of ITO till such time exemption is available to the Zone Enterprise.

    However currently exemption is not granted under Income Tax Ordinance, 2001 Section 113, 147, 148, 153, 236K, 236W etc., from collection of income tax.

    Since income of Zone enterprise is exempt from income tax under clause 126E, it is proposed that exemption be granted to Zone enterprises and operators from all withholding and tax collection provisions as these will lead to refunds.

    The PBC recommended necessary insertion be made in clause 11A of Part IV of the Fourth schedule to the Income Tax Ordinance to exempt Zone operator and Entity from minimum tax under section 113.

    Import of raw material by Export Oriented sector is subject to income tax withholding of 1 percent whereas on the other hand, import of Plant & Machinery by these sectors is subject to 5.5 percent income tax withholding.

    Entry no. 1(iv) in column number 2 of the Table specifying rate of tax at import stage as given in Part-II of the 1st Schedule to the Income Tax Ordinance, 2001 be amended as follows:

    “Manufacturers covered under Notification No. S.R.O. 1125(I)/2011 dated the 31st December, 2011 and importing items covered under S.R.O. 1125(I)/2011 dated the 31st December, 2011, Plant & Machinery and Spare parts;”

    Greenfield Industries –

    Through the Tax Laws (Second Amendment) Ordinance, 2019, the term Greenfield industries has been defined in the Income Tax and Sales Tax laws to make it identical to “Pioneer Industry”.

    Therefore it is recommended: “Delete condition no. “(iv)” of the definition of Greenfield industry to make it distinct from Pioneer industry, otherwise the purpose of growth through investment would not be achieved.”

  • Tax refunds should be adjustable against liability recommended

    Tax refunds should be adjustable against liability recommended

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended inter adjustment of income tax and sales tax refunds should be made part of the law.

    In its recommendations for budget 2020/2021, the representative body of foreign investors and multinational companies working in Pakistan, highlighted the issue of delay and procedural hassle in processing of outstanding refunds.

    It said that protracted delays in settlement of tax refunds is one of the biggest contributors in distorting the commercial image of Pakistan in all the perception and ease of doing business surveys and a major factor negatively impacting inflow of Foreign Direct Investment (FDI) in the country.

    This has been regularly pointed out at the relevant forums, including to the Prime Minister and Minister of Finance, the OICCI added.

    Moreover, through Finance Act, 2019, government has introduced refund bonds for the settlement of long outstanding income tax refunds.

    These refunds bonds have maturity of three years with 10 percent simple interest per annum payable at maturity.

    “As of February 2020, tax refunds pending of OICCI members aggregated to Rs86 billion, which remained unsettled for a very long time, some of which are pending prior to 2005.”

    However the refunds process is still long drawn and refunds of many companies have not been processed for many years although Federal Board of Revenue (FBR) already has information readily available on the system.

    Furthermore, despite specific directions in the Income Tax Ordinance, 2001, fair mechanism of issuance of government bonds in lieu of income tax refunds is not provided yet and where issued, these bonds are neither being traded freely in the market nor being discounted by the banks mainly due to low interest versus current prevailing discount rate.

    The OICCI recommended following:

    All pending tax refund be cleared within next six months in an orderly/ prearranged manner.

    Verification process for refunds should start automatically as soon as an application for refund is filed by the taxpayer and tax refunds be cleared within 45 days.

    A timely settlement of the determined refunds should be made, and if there is a liquidity issue then issuing marketable Government bonds/securities be considered.

    Amend current fixed interest rate of 10 percent to floating interest rate linked with KIBOR.

  • APTMA demands allowing textile downstream supply chain operation

    APTMA demands allowing textile downstream supply chain operation

    The All Pakistan Textile Mills Association (APTMA) has fervently appealed to the Sindh government to lift restrictions on the textile downstream supply chain, emphasizing the urgent need to resume operations to prevent a looming unemployment crisis.

    (more…)
  • General rate of minimum tax proposed at 0.5 percent

    General rate of minimum tax proposed at 0.5 percent

    KARACHI: Federal Board of Revenue (FBR) has been proposed to reduce the general rate of minimum tax to 0.5 percent in the upcoming budget 2020/2021.

    In its proposals for budget 2020/2021, the Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended to review minimum tax regime.

    It said that standard rate of minimum tax under section 113 of Income Tax Ordinance, 2001 (ITO 2001) was enhanced from 1.25 percent to 1.50 percent through Finance Act 2019, whereas, reduced rate of minimum tax also prevails for specified sectors.

    The application of MTR is resulting in an effective tax rate which is even higher than the standard rate for nearly all companies of specialized sectors with high turnover and low margins or regulated prices.

    Further, Alternate Corporate Tax is a discriminatory regime, which hurts industries with major capital investment.

    The OICCI recommended the following:

    i. The general rate of Minimum Tax under section 113 of ITO 2001 should be reduced to 0.5 percent.

    ii. Minimum Tax rate should be reduced to 0.2 percent for Oil Marketing/ Refineries/ LNG Terminal Operators, large chemical companies, authorized dealers of local vehicle manufacturers and traders, including large trading houses, dealing in sectors with high turnover and low margins.

    Minimum tax should be adjustable against future tax liabilities for next 6 years.

    iii. Minimum tax liability should be computed in comparison with normal tax liability without taking into account any initial depreciation allowance.

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

  • Terminal operators refuse to extend waiver from detention, demurrage charges: KCCI

    Terminal operators refuse to extend waiver from detention, demurrage charges: KCCI

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has said terminal operators have refuse to extend waiver from demurrage and detention charges despite clear instruction of the government to facilitate the trade in the wake of COVID-19.

    (more…)
  • FPCCI suggests measures to broaden tax base, improving tax to GDP ratio

    FPCCI suggests measures to broaden tax base, improving tax to GDP ratio

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested measures to broaden tax base and improving tax to GDP ratio.

    (more…)
  • Karachi Chamber urges shipping lines to waive detention charges

    Karachi Chamber urges shipping lines to waive detention charges

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has urged shipping lines to waive detention and other charges considering extraordinary situation due to coronavirus and lockdown.

    To support the consignees in Pakistan during the ongoing difficult times, President KCCI Agha Shahab Ahmed Khan urged all shipping lines and their agents in Pakistan to give total waiver of detention charges and any penalties or charges under other heads on all consignments that landed from March 10, 2020 up to May 31. 2020.

    In separate letters sent to All Pakistan Shipping Association and Pakistan Ships’ Agents Association, President KCCI pointed out that in the present extra-ordinary circumstances, the shipping lines and agents have a moral and ethical responsibility to extend relief to the consignees and waive the entire detention charges and any other penalties or charges on FCL and LCL consignments, to facilitate clearance and delivery of cargo to the consignees.

    “It is important to mention that the Ministry of Maritime Affairs and KPT have also approved the waiver of port demurrage and allowed additional 10 days of free storage for the imported cargoes. But unfortunately due to accumulated detention charges importers are unable to clear their containers,” he added.

    He said that due to the lockdown during the months of March and April 2020 imposed by the government to prevent the spread of coronavirus pandemic, many importers have not been able to clear the import cargoes within the stipulated free detention period allowed.

    Consequently, very large amounts of detention charges and penalties have accumulated which the consignees are unable to pay, while also a large number of containers have piled up at the ports.

    He informed that during the last few weeks, KCCI received a large number of representations from trade and industry which are facing heavy losses due to the exorbitant container detention charges by including shipping agents and representatives of shipping lines.

    The losses are over and above those caused by a sharp decline in prices of various commodities and products which have been imported by these consignees, thus making it impossible to pay for the heavy detention and other penal charges demanded by the shipping agents and their principals.

    Many such entities have been pushed to a situation of Force Majeure.

    Agha Shahab further noted with deep concern that the same shipping lines have voluntarily extended concessions and relief to their clients in India while they have refused to allow any concession to consignees based in Pakistan.

    He was of the opinion that Pakistan’s shipping trade has been a lucrative source of income for shipping lines who have earned decent profits from this market for many years.

    “It is time they support the consignees in a situation where the entire global economy is passing through an unprecedented crisis and all business entities in Pakistan are incurring heavy losses as a consequence of extra-ordinary circumstances,” he stressed.

  • Curtailing powers of tax officers in recovery, entering premises suggested

    Curtailing powers of tax officers in recovery, entering premises suggested

    KARACHI: Business community has suggested curtailing powers of tax officers while invoking provisions of sales tax laws.

    (more…)