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Category: Trade & Industry

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

  • 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.

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  • 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.

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  • 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.

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  • 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.

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  • Massive under-invoicing by commercial importers destroying domestic industry: PBC

    Massive under-invoicing by commercial importers destroying domestic industry: PBC

    KARACHI: Pakistan Business Council (PBC) has said that massive under-invoicing especially by commercial Importers is destroying domestic industry.

    In its budget proposals for fiscal year 2020/2021, 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.”

    In order to resolve the problems, the PBC proposed 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 percent 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 percent. Presently, tax collected from commercial importers is treated as an advance tax. Final 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 percent 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.

    Transparency in collection of taxes will discourage mis-declaration, measures to discourage evasion of taxes and duties will help industry to fairly compete with unscrupulous imports and also Government stands to benefit from the increased indirect taxes revenues.

    It will also help in accountability of the customs staff and will reduce the incidence of Customs Duty & Sales Tax evasion and increase government revenues.

    The proposed change will help in boosting the manufacturing base of Pakistan, the PBC added.

  • FPCCI suggests introducing taxpayers’ bill of rights

    FPCCI suggests introducing taxpayers’ bill of rights

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has recommended introducing taxpayers’ bill of rights in the forthcoming budget.

    The apex trade body in its proposals for budget 2020/2021, said that the present situation of antagonism between the tax collection agencies and taxpayers needs to be reconciled through a democratic process and implementation of Taxpayers’ Bill of Rights.

    The goals fixed under Pakistan Raises Revenue (PRR) Project, estimated at US $1.6 billion, of which financing by World Bank is $400 million, cannot be achieved through handpicked experts (mostly coming on donors’ dictates) who are completely oblivious to the mundane realities of Pakistan.

    The bad faith, antagonism and mistrust prevailing between the government and taxpayers can only be removed through a process ensuring a just and fair tax system in Pakistan for which the blueprint and roadmap is available, and we need no foreign funding.

    The only thing lacking is political will to debate, promote research on the various challenges and find out workable solutions. This process will certainly require some time.

    Meanwhile, PTI Government in order to restore the confidence of the taxpayers should immediately start the process of enactment of Taxpayers’ Bill of Rights.

    The draft of Taxpayers’ Bill of Rights was prepared for the first time in 2014 by a sub-committee, constituted by the Federal Tax Ombudsman (FTO), in which Dr. Ikram Ul Haq had put in his best skill to suggest the balance between the rights of taxpayers and authority of tax collectors.

    Thereafter, the Tax Reforms Commission (TRC), after 18 months of its establishment, also presented the same in its final report submitted in February 2016. However, until today no practical step has been taken to implement it.

    It is high time that the incumbent Government should introduce the Taxpayer Bill of Rights in the finance bill 2020-21

    The FPCCI further said that it is a time that we should focus on macroeconomic management issues including budgetary consideration which can have positive effect on long term business efforts towards capital formations and investment of trust and justice in the tax policies and obligations of tax statutes.

    Independent Tax Adjudication System, which was promised two decades back during the period of General Parvez Musharraf be included in the ensuing Finance Bill, 2020. Some of the actions were taken but un-sustainability and cascaded developments remain absent. The prosecutors continue to remain adjudicators in the system.

  • Immunity from audit against CNIC condition demanded

    Immunity from audit against CNIC condition demanded

    KARACHI: The business community has demanded the Federal Board of Revenue (FBR) to give immunity from audit against CNIC condition for tax year 2020.

    In its budget proposals for fiscal year 2020/2021, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) demanded amnesty from audit against Computerized National Identity Card (CNIC) condition for tax year 2020.

    The FPCCI said that the condition of CNIC on unregistered sales was introduced in the Finance Act 2019 but it was not implemented in its true spirit because of various reasons.

    The FPCCI highlighted that in July 2019 was initially exempted of CNIC condition through legislation.

    From August 2019 to January 2020, the condition was relaxed through agreement between shopkeepers and FBR.

    Thereafter, from late February 2020 till unforeseen future, there has been tremendous pressure on the markets due to complete lockdown of the whole country because of the ongoing COVID-19 pandemic.

    The FPCCI said that CNIC condition has been causing cashflow issues since its implementation which will further intensify during the current pandemic of COVID-19, especially for registered taxpayers.

    Therefore, in order to facilitate the registered Taxpayer, a general amnesty through legislation is requested in the next budget regarding CNIC condition for the whole tax year 2020 starting from August 2019 to June 2020.