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Category: Trade & Industry

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  • Tax exemption withdrawal ahead budget to adversely affect trade, industry

    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.

  • Tax recovery through bank accounts should only from unregistered persons

    Tax recovery through bank accounts should only from unregistered persons

    KARACHI: Federal Board of Revenue (FBR) has been urged to restrict its powers of tax recovery from bank accounts on unregistered persons.

    In its proposals for budget 2021/2022, Karachi Chamber of Commerce and Industry (KCCI) pointed out Section 140 of Income Tax Ordinance, 2001 that is related to recovery of tax from persons holding money on behalf of a taxpayer.

    According to the law for the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –

    (a) owing or who may owe money to the taxpayer; or

    (b) holding or who may hold money for, or on account of the taxpayer;

    The chamber said that this provision and further access to information on bank accounts under other provisions of law, have been counter-productive and led to a flourishing cash economy. Many innovative ways have been evolved by businesses similar to block-chain and a local hundi system. Such provisions only affect the documented businesses while the entire undocumented sector is immune from such laws.

    The KCCI said that access to bank accounts may only be limited to accounts of unregistered persons with unusually high amounts of transactions.

    Commissioner should only be authorized to obtain information about the funds in accounts and to seek clarification as to the nature of transactions and sources of funds. Such persons may be brought into the tax-net.

    The chamber said that it will:

    1. Relief to the registered persons and restore confidence in banking system. Encourage official transactions.

    2. Bring unregistered persons into the tax-regime.

    3. Stimulate economic activities and growth. Increase bank deposits which may be used for lending to industry.

  • FBR suggested to stop intelligence, investigation raids

    FBR suggested to stop intelligence, investigation raids

    The Karachi Chamber of Commerce and Industry (KCCI) has called upon the Federal Board of Revenue (FBR) to reevaluate its approach to tax enforcement, urging a halt to the aggressive raids conducted by the Directorate of Intelligence and Investigation.

    (more…)
  • FBR proposed to restore sales tax zero rating

    FBR proposed to restore sales tax zero rating

    KARACHI: Federal Board of Revenue (FBR) has been proposed to restore zero-rating of sales tax with objective of ‘no payment no refund’.

    The FBR received proposals for the upcoming budget 2021/2022 from Karachi Chamber of Commerce and Industry (KCCI).

    It is highlighted that in the budget 2019-2020, the Federal Government rescinded SRO1125 and imposed 17 percent Sales Tax on erstwhile Five Zero-Rated Export Sectors and exporters are required to apply for refund after export of consignment.

    It is observed that the exporters who have filed their refund claims to date have received 35 percent of claims payment only while 65 percent of the refund claims are stuck up with the Government which is approximately 12 percent amount of exporter’s running capital.

    However, the profit margin of exporters is around 5 percent to 8 percent. Moreover, exporter can apply for refund only after export of consignment.

    In this manner their liquidity is stuck. Likewise, the exporters make purchases for production of export products at least six months in advance which is consumed based on export orders causing financial hardships.

    The KCCI proposed that it is imperative to revive SRO 1125 in its true spirit and reintroduce system of No Payment and No Refund of Sales Tax for the Five Export Oriented Sectors.

    Although the Government has streamlined the FASTER system, nonetheless, the exporters are facing liquidity crunch amid condition of filing claims only after dispatch of shipment which takes at least three months time. Consequently, the liquidity is held-up causing financial pressure on exporters.

    The chamber explained the benefits of reviving zero rating that the government must consider to restore and revive Zero-Rating under SRO1125 in real spirit or consider reduction in rate of Sales Tax from current 17 percent to 5 percent to facilitate the exports ensuring availability of required/ adequate liquidity and smooth Cash flow, to boost the confidence of Exporters to enhance their exports and cement their business ties with the foreign counterparts to capture true business potential.

  • KCCI proposes single digit sales tax rate

    KCCI proposes single digit sales tax rate

    KARACHI: Business community has recommended to bring the sales tax rate to a single digit in order to incentivize documentation and improve compliance.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 said that the rate of sales tax at 17 percent in Pakistan is among the highest in the region.

    “Realistically such high rate of Sales Tax is in fact a disincentive to documentation and compliance.”

    Mostly the indirect taxes at such high rate at source encourage smuggling, evasion, under-invoicing and mis-declaration. It has been a disincentive to documentation of supply chain and has only burdened a narrow base of registered manufacturers, importers and traders.

    The chamber proposed that the rate of sale tax should be reduced to a single digit on all sectors to reduce cost of inputs and provide support to reduce prices of consumer goods as well as the cost of exports.

    Giving rationale, it said that industry / economy will boost up, raise in the tax base, promote the documented & registered economy, and will generate revenue with growth.

    Smuggling, under-invoicing and mis-declaration will be curtailed. Fake and Flying invoices eliminated.

  • FPCCI hails speedy customs clearance

    FPCCI hails speedy customs clearance

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Wednesday hailed the tax authorities for speedy customs clearance to goods imported by erstwhile FATA/PATA.

    Mian Nasser Hyatt Maggo, President and Nasir Khan Vice President of the FPCCI appreciated the FBR for its efforts to improve ease of doing business and trade facilitation by allowing clearance of goods imported by ERSTWHIL FATA/PATA and installations of tracking devices manually to ensure en-route monitoring and tracking till the development of the functionality in the WEBOC system.

    They further informed that under this FBR directives the processing of such consignments may be cleared in the system by the respective Collectorate after implementation of the required conditions as prescribed in the CGO and Board instructions.

    M/s. TPL Trakker (Pvt.) Ltd. has been assigned for manually installation of tracking devices for consignments.

    Control mechanism for clearance of such consignments will remains with the Collectorate while it may get the written confirmation for concerned clearing agents/bonded carriers.

    While referring FBR’s Order issued on March 17, 2021 they said that FPCCI have been emphasizing for development of economically deprived regions through enhancement of transit trade by improving trade facilitations.

    They further added that the global economic scenario has drastically changed, e-commerce and digitalization has gained significance for international trade therefore, FBR and other stakeholders should also follow and improve their working according to the new technological development in trade.

  • FBR urged to withdraw CNIC condition under sales tax law

    FBR urged to withdraw CNIC condition under sales tax law

    KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw the mandatory requirement of Computerized National Identity Card (CNIC) on buying and selling under Sales Tax Act, 1990 till the time a sufficient number gets register for sales tax.

    Karachi Chamber of Commerce and Industry (KCCI) has highlighted the issue as by amendment to Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, and addition of 10th Schedule, it is mandatory to provide CNIC number of Unregistered person in the invoice. Similar statute has been added U/S.19A of Federal Excise Act, Sec.216A to ITO and Sec.156A of Customs Act.

    Moreover 3 percent further tax is also charged on sales to unregistered buyers even if the CNIC number is provided, which is totally unjust and tantamount to penalizing the registered persons who have to bear the burden of 3 percent further tax.

    The chamber said that rather than generating more revenue, this provision has resulted in proliferation of undocumented cash transactions.

    With hardly 45000 registered entities in Sales Tax Regime, it is very hard to find a registered buyer. This has affected the entire supply chain including manufacturers, importers and traders in Documented Sector and has led to greater advantage for smugglers and undocumented sectors as they do not have to face any such condition. Many registered person are now forced to issue flying invoices to registered persons to overcome CNIC condition and avoid 3 percent Further Tax.

    The chamber recommended that requirement of CNIC should not be mandatory till the time that number of registered persons in Sales Tax regime has substantially increased.

    Providing CNIC number should be optional and may be treated at par with STRN if provided in the Sales Tax Return.

    Further Tax on supplies to unregistered buyer should not be charged if CNIC number is provided in Sales Tax Return.

    In case CNIC number of unregistered buyer of Raw Materials is not provided, VAT may be charged at 1.7 percent on sellers of Raw Material.

    Giving rationale, the chamber said that it will discourage cash economy and encourage documentation by placing the trust in registered persons.

    Discourage Fake and Flying invoices which are issued to avoid 3 percent further tax.

    Enhance business transactions through banking channels and promote growth.

  • Duty, tax exemption on tea export grossly misused: PTA

    Duty, tax exemption on tea export grossly misused: PTA

    KARACHI: Pakistan Tea Association (PTA) on Saturday pointed out gross misuse of duty and tax exemption granted on tea re-export by importers of tea as raw material.

    The office bearers of the association pointed out the SRO 450 which is meant for re export of tea after value addition, the importers who have exemption of this particular SRO, this is observed they are misusing this exemption and selling teas to various cities across country without any documents.

    Though the teas imported meant for re-export, these teas are imported at zero rated duties and taxes ,this is noticed these teas are not even going to specific warehouses and cities, these malpractices causing huge loss to revenue and discouraging the importers who are paying full duties, they added.

    PTA office bearers Muhammad Aman Paracha, Chairman and Zeeshan Maqsood, Sr. Vice Chairman and Convener, FPCCI Standing Committee on Tea Trade on the occasion expressed their views that tea is common men drink and shall be treated essential and common men drink rather than luxury, tea is the only traditional product being consumed by elite class & poor people.

    Revised duties and taxes are suggested for the upcoming federal budget 2021/2022: “Custom Duty 5 percent, sales tax 7 percent, withholding tax 2 percent and additional customs duty at 0 percent.”

    Chairman said that the tea is a raw imported from various countries blended and processed and available to the end users. Therefore, this shall be treated as raw material rather giving incentives to selected importers.

    Besides, tea importers are also paying 30 percent value addition at port stage as a retail/end user tax on the basis of minimum retail price.

    In light of above it is requested that fool proof system shall be adopted by the relevant authorities of Federal Board of Revenue (FBR) and shall be strictly monitored, whether teas are going to their respective registered cities/areas? And re exported as per directions in this specific SRO.

    PTA representatives showed fear if the options/exemptions highlighted above will be continued than legitimate business will come to halt & everyone will try to get such exemptions, this could be serious threat to state revenue & revenue loss will start escalating.

    Further few importers successfully obtained various tax exemptions for PATA/FATA & Azad Kashmir etc which is also being misused, this is observed that teas imported under said exemptions are also going to other cities rather than to specific areas, this must be monitored strictly as well.

  • FPCCI expresses concerns over falling foreign direct investment

    FPCCI expresses concerns over falling foreign direct investment

    KARACHI: Federation of Pakistan Chamber of Commerce and Industry (FPCCI) has expressed concerns over falling foreign direct investment (FDI) despite incentives granted to foreign investors.

    In a statement issued on Saturday, the apex trade body expressed serious concern over the falling trend of foreign direct investment. The FDI fell by 30 percent in the first eight months of FY21, reflecting foreign investors’ poor confidence in the country’s investment environment.

    The government has been claiming to endeavor to invite foreign investment in the housing sector but failed to make the sector attractive in this regard. Investment in construction industry has improved at local level but the sector has huge prospects for foreign investors, as the country has been lacking more than 10 million housing units for its 220 million people, observed Mian Anjum Nisar, the FPCCI’s ruling group BMP Chairman.

    “We need to prepare the ground for attracting larger FDI flows in the medium and long-terms, making the local environment more attractive for foreign investors. Pakistan should continue to get some FDI under the China-Pakistan Economic Corridor (CPEC) and even accelerate its inflows by gaining wider domestic socio-political support for CPEC projects and by removing procedural bottlenecks that delay their timely implementation,” he added.

    He said that faced with a balance-of-payments issue, country urgently needed as much foreign investment as possible keeping in view of limited scope of volumetric expansion in exports and remittances in the short-term.

    Mian Anjum Nisar said that Pakistan has been unable to attract any sizeable foreign investment for the last several years despite providing incentives on taxes and assurances for one-window facility to the investors.

    Statistics show that the country received $1.3 billion in FDI during July-Feb 2020-21 compared to $1.85 billion in the same period of last year, a decline of 29.9%, indicating that the government has failed to win the confidence of foreign investors in the national economy due to multiple reasons. Moreover, the inflow of FDI in February has registered a steep fall of 44% to $155 million against inflow of $277.5 million in Feb 2020. It is fact that the entire world has been witnessing falling inflows of FDI due to the Covid-19 pandemic.

    “The pandemic has eroded the trust of investors in investment, which has an adverse impact on every step of FDI, including input supplies, increasing uncertainties and liquidity constraints for the multinational firms, he said and added there are also other external factors out of the government’s control.”

    It is unfortunate that the portfolio investment also presented a dark picture as it noted a net outflow of $256 million during 8MFY21 compared to an outflow of $26.3m in the same period last year.

    The State Bank of Pakistan (SBP) data showed that the overall foreign private investment during 8MFY21 dropped by 43% to $1.04 billion compared to $1.83 billion in the same period last year.

    The BMP chairman said that the Chinese investment remained at the top of the list of countries invested in Pakistan but the inflows from Beijing also dropped to $493 million during 8MFY21 despite the fact that for last several years China has been the top investor in the country.

    While the country is getting extra support from remittances being sent by the overseas Pakistanis, it looks still hard to improve the foreign investments and exports to any significant level.

    The FPCCI leader said despite all-out efforts and incentives, exports grew slowly while foreign investment could see a change once the country exited the FATF grey list. The status quo for international investment for Pakistan has always focused on coal and power but the government should tap into the small, growing sectors, such as technology, to see how it can build a more sustainable economic base, even in times of crisis.

    Mian Anjum Nisar observed that the government, now in its third year, is trying to take FDI to new heights but its efforts are yielding a moderate success only, as the foreign portfolio investment in equities, too, remained negative in 2018-19 and 2019-20 in continuation of an earlier trend.

    The FPCCI former chief said that economic fundamentals are not strong and fast-changing dynamics of geopolitics demand too much from the country if it wants to attain sustainable economic growth and development. These two factors, combined with the Covid-19–triggered recession in major economies, make it difficult to accelerate growth of foreign investment.

  • Importers face surcharges on overstayed consignments

    Importers face surcharges on overstayed consignments

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has discussed the matter of overstayed consignments at warehouses which was causing surcharges on clearance to importers.

    FPCCI President Mian Nasser Hyatt Maggo on Thursday said that due to COVID-19 commercial activities are down causing overstay of consignments and subsequently facing surcharge on clearance. During the meeting of the FPCCI Advisory Council on Budget various issues were discussed including period of limitation of warehousing.

    The President FPCCI said that the economic slowdown, recession in the market and financial constraints due to COVID-19, importers are unable to clear their consignments in time which has led to a situation where large quantities of warehoused goods have piled up incurring heavy surcharge as no general concession has so far been extended by the Federal Government in this matter. The situation is also impacting substantial amount of revenue.

    During the meeting of the Advisory Council headed by Mr. Zakariya Usman former President of FPCCI issue of importers of raw material were presented who are facing problems due to their consignments lying in customs bonded warehouses beyond the period stipulated under section 98 of the Customs Act, 1969. The meeting resolved to approach FBR to consider grant of waiver of surcharge on overstayed consignments in order to alleviate the problems of the importers.

    Mian Nasser Hyatt Maggo President FPCCI said that the government under the present difficult circumstances may favourably consider the enhancement of customs bonded warehousing period limitation up 60 days so as to mitigate hardship of importers.