KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended the government to eliminate culture of amnesty schemes as such measures encourage tax evaders.
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FPCCI expresses concerns over policy rate hike
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concerns over recent significant rise in key policy rate by State Bank of Pakistan (SBP).
In a statement on Wednesday Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) showed his serious concern over the hiking of policy rate by another 150 basis points in view of prevailing inflation, devaluation of currency and twin deficit in Pakistan.
He added that SBP continues to operate a tight monetary policy despite the clear evidences that this policy strangulates investment and hampered the economic activities in Pakistan in Pakistan.
He underlined that the IMF bailout package will further create burden on poor segment of society in terms of rising utility prices which will ultimately increase inflation in the economy.
At present, every Pakistani possess a debt of one lac fifty nine thousands rupees.
The President FPCCI termed the contractionary monetary policy as an anti-investment policy which has declined the economic activities in the first ten month of the current fiscal year due to declining of large scale manufacturing and service sector.
He indicated that 12.25 percent policy rate is very high compared to regional economies like India 6.0 percent, China 4.35 percent, Sri Lanka 9.0 percent, Thailand 1.75 percent, Indonesia 6.5 percent, Malaysia 3.00 percent etc.
While commenting on the devaluation of currency, he stated that the rising of exchange rate will increases the prices of imports particularly petroleum products which comprises 30 to 35 percent import bill of Pakistan.
He suggested the government to intervene in the economy for currency stabilization and control of inflation. He said that the present inflation rate is 7.0 percent which is high compared to last year same period 3.8 percent; but this inflation is cost push inflation which can’t be controlled through demand management policies.
The major cause of rising inflation in the country is high cost of doing business particularly utility prices, increase in the prices of industrial inputs and shortage of essential items of daily necessity.
The Government should focus to increase the demand for credit by declining interest rates and make easy access to finance. Globally, the aim of monetary policy is to protect the value of the currency in co-ordination with the fiscal policy in order to achieve the objectives of macro-economic stability with constraining inflation and expansion of private sector investment, he added.
The President FPCCI further stated that the government should create its own fiscal space for financing its expenditures instead of borrowing from SBP and other institutions. During the first ten month of year, there was an expansion in private sector credit, but is largely attributed to working capital due to rising of input prices.
This private sector credit should be expanded to agriculture and industrial sector which are showing declining growth trend, he suggested. -
FBR restructuring proposed to make autonomous body
KARACHI: The government has been proposed to make Federal Board of Revenue (FBR) as an autonomous body on similar line as State Bank of Pakistan.
The Overseas Chamber of Commerce and Industry (OICCI) in its budget proposals for 2019/2020 suggested restructuring of FBR as an independent governing body.
It suggested that FBR should be made an autonomous body on similar lines as State Bank of Pakistan, SECP, and Internal Revenue Services (IRS) of United States.
FBR should operate and work in a corporate governance structure with a Board of Directors, vested with powers like that of the Boards of Public listed companies.
The Chairman of FBR and fifty percent of the Board members may be nominated by the government (Ministries of Finance, Law, and Commerce) and, the remaining fifty percent Board members should be nominated by bodies like OICCI, PBC and ICAP.
A transparent accountability system in tax administration should be introduced, and reasonable independence and empowerment given to various operational positions.
The external audit of FBR should be done annually, by an independent international audit firm whose report should be presented and fully discussed in the Tax Policy Board meeting.
There should also an Internal Audit function within the FBR for an effective ongoing internal audit reporting directly to the independent members of the Board nominated by the Trade bodies.
Apart from revenue collection a key function of the FBR should be to address coordination issues between federal and provincial revenue authorities, with monthly meetings to ensure ease of doing business for taxpayers.
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Tax amnesty scheme step in right direction: FPCCI
KARACHI: The members of Federation of Pakistan Chambers and Commerce of Industry (FPCCI) have unanimously declared the recently announced tax amnesty by the present government is step in right direction.
The FPCCI held an emergent meeting of its members at its head office Karachi on Saturday under the chairmanship of Abdul Rauf Mukhtar, Acting President of FPCCI and reviewed/discussed the new tax amnesty scheme namely “Asset Declaration Scheme 2019” as announced by the PTI government which has come in to effect through a Presidential Ordinance.
The meeting was attended by S.M. Muneer, leader of the Business Community and Former President of FPCCI; Dr. Mirza Ikhtiar Baig, Sr. Vice Presidents; Vice Presidents FPCCI Arshad Jamal, Muslim Muhammadi, Waqar Mehmood Khan and Noor Ahmed Khan, Zubair Tufail, Former President FPCCI, Former Sr. Vice Presidents FPCCI Khalid Tawab, Syed Mazhar Ali Nasir and Aamer Ata Bajwa, Former Vice Presidents Hanif Gohar, Shakil Dhingra, Akbar Abdullah and other representatives of trade and industry.
FPCCI acting president Abdul Rauf Mukhtar termed the scheme as a right step in the right direction with the objective to bring the tax evaders under the tax net, enhancing the country’s revenue base, documentation of economy, curtailing the size of ever increasing black economy and to bring dead assets in the mainstream of economy and make them functional.
He also urged the government to ensure complete secrecy and confidentiality of the declarants’ data to enhance the confidence of tax payers in the scheme- a pre-requisite for success for any scheme.
Highlighting salient features of the scheme, the FPCCI Acting President informed, “The rates of tax imposed on undisclosed assets, sales and expenditures would be 4 percent on all assets; rate of tax would be 1.5 percent on domestic immovable properties; rates of tax would be 6 percent on foreign liquid assets not repatriated; rate of tax would be 4 percent on unexplained expenditure and rate of tax would be 2 percent on undisclosed sales.”
The participants termed the 4 percent tax rate as attractive for legalisation of black money held in the form of expenditures, sales and assets including foreign assets; however, they said that duration of the scheme is relatively less as the scheme would offer a period of 45 days to people for declaration of their undeclared assets along with payment of taxes until June 30, 2019.
They added that the PTI government announced its first tax amnesty scheme for whitening of undisclosed expenditures, sales and assets including foreign assets at nominal tax rates and were of the unanimous opinion that the time period of the scheme should be extended beyond June 30, 2019 up to December 31, 2019.
They appreciated the FBR’s move to issue the scheme in Urdu language as well as in simplified declaration form.
They were of the opinion that legalization of undeclared assets at 4 percent is very attractive although the rates are comparatively higher as compared to last amnesty scheme.
They added for the first time lucrative rate of 1.5 percent has been offered for real estate sector.
They, referring to the size of the parallel economy were of the opinion that resolution of real state and bearer instruments issues were necessary to clip the wings of grey economy otherwise these would be surfacing periodically in future and the government would have to offer amnesty scheme again and again.
They also lauded government efforts to broadening the tax base and enhance tax to GDP ratio as it was one of the lowest in the world.
The participants were of the opinion that this time the scope of the scheme would be for those avenues which were not covered in earlier ones like sales tax and benami assets especially benami bank accounts.
The members urged the government to publicize the scheme rigorously because that one may who may not be aware the penalties associated with it for not availing the scheme, including confiscation and imprisonment, and that this is the very last chance to avail it.
They also proposed that the limit of Rs5 million for gold jewelry be withdrawn and the condition of depositing cash in hand in bank to avail the scheme be also removed.
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FBR chairman agrees on abolishing withholding tax on raw materials
KARACHI: Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) on Saturday asked business community to provide list of raw material for reducing tax rates on import stage.
Addressing the business community at Karachi Chamber of Commerce and Industry (KCCI), Shabbar Zaidi agreed with the business community that there should not be withholding tax on import of raw material.
The KCCI members raised the issue that withholding tax rates ranging 3 percent to 6 percent were imposed on import of raw materials.
“Yes. There should not be withholding tax on raw material,” Zaidi said and asked the KCCI to provide list for taking action before the next budget.
Talking on Amnesty Scheme – 2019, the chairman said that the asset declaration scheme was clear and there was no ambiguity.
He said that the scheme would be part of the Finance Bill for formal approval from the parliament and it would be the same as promulgated through the presidential ordinance.
The chairman said that the rules were being formulated for intending declarants.
Shabbar Zaidi also talked about smuggling and misuse of tax concessions.
He said that tax relief may be given to small number of raw materials but it cannot be extended to all imported goods.
He said that Afghan Transit Trade was used for smuggling into Pakistan. “But there are other ways to import illegal goods into the country,” he added.
The chairman asked the business community that once they declare the smuggled goods were illegal for selling in the local market. “If the business community support and promise there will be no protest then the raids against illicit goods will be launched from tomorrow,” the chairman added.
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Exemption on import of telecom equipment demanded to encourage investment
KARACHI: Foreign and multinational companies have demanded the Federal Board of Revenue (FBR) to exempt sales tax and customs duty on import of telecom equipment in order to encourage investment in this sector.
The Overseas Chamber of Commerce and Industry (OICCI) in its proposals for budget 2019/2020 said that telecom was very investment intensive sector and it should be given concessions in terms of reduced rates of customs duties and exemption of sales tax against import of telecom equipment.
The exemption and concessions are important to promote the teledensity throughout the country especially in far flung areas so that the benefits of next generation mobile services can be reached to the masses living in backward areas, said the OICCI – the representative body of foreign investors and multinational companies in Pakistan.
Previously, telecom sector was importing telecom equipment at 5 percent customs duty and zero percent sales tax under SRO 575, however, through Finance Act, 2015, this SRO was rescinded and consequently, the customs duties on network equipment have been increased from 5 percent to 20 percent and sales tax exemption has been removed.
“The increase in custom duty and levy of sales tax has badly affected the pace of growth and digital inclusion as the cost of doing business has been significantly increased which is an additional barrier to network coverage in Pakistan,” the OICCI said.
The roll out of 3G/4G network is still very much at the early stages and reduction in customs duties and restoration of sales tax exemption will help the operators to sustain the necessary investments.
Therefore, the OICCI recommended to reinstate the concessionary custom duties/ exemption of sales tax (refer SRO 575) to encourage investments in IT/ telecom infrastructure.
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Elimination of regulatory duty, additional customs duty on essential raw materials recommended
KARACHI: Federal Board of Revenue (FBR) has been suggested to eliminate additional customs duty and regulatory duty on essential raw materials.
The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals recommended tariff rationalization in the forthcoming for budget 2019/2020.
It recommended elimination of additional custom duty and regulatory duty on essential raw materials, which are either not locally available or in limited supply, used for local manufacturing.
The OICCI – the representative body of foreign investors – also suggested bringing illicit trade into tax ambit.
It said that on the basis of survey conducted by OICCI amongst its members, losses to the government exchequer due to Illicit trade (business in products which are either smuggled, counterfeit, under-invoiced imports, sold by unregistered manufacturer/seller, etc.) is estimated at Rs200 billion (tobacco alone estimated at Rs63 billion only).
In order to control the Afghan Transit Trade, it recommended:
Harmonize duty and tax rates to remove the incentive for evasion.
Fix quantitative limits for imports based on genuine Afghan needs and size of population.
Establish a basis of collecting duty/taxes at the point of entry into Pakistan for the account of the Afghanistan Government
Fix import value in consultation with the brand owner in Pakistan.
Customs procedures and Cross-border rules should be published for transparency.
Containers coming back from Afghanistan should be checked by customs.
There should be a negative list of items which are not utilized in Afghanistan; yet are imported and make their way into Pakistan.
Streamlining of border crossing procedures on financial guarantee by banks and anti‐corruption measures.
Export to Afghanistan be facilitated with simplified procedure by FBR and border control authorities.
For stringent controls illicit trade, it recommended:
Introduce tighter penalties for illicit trade across categories, including criminal liability across the value chain, including retailers, distributors and manufacturers
Introduce a special division/ task force to raid retailers and manufacturers to confiscate and destroy illicit stocks
Launch a media campaign to increase awareness in consumers of the harms of illicit products and discourage them from purchasing such products
The OICCI suggested structural reforms in the customs:
Do a thorough review of the custom regime, in consultation with brand owners, to address issues of counterfeiting, smuggling, and rationalization of duty structure and fixing of import Tariff prices.
Custom valuation should be done on modern lines through online search and matching international and regional pricing and taking local legal importers of items on board.
IPR (Intellectual Property Rights) laws implementation in Pakistan need to be strengthened. Special IPR tribunals may be formed for speedy trials leading towards IPR compliance at par with international standards of IPR enforceability.
Unauthorized imports of counterfeit products should be effectively checked through registration of brands with the custom authorities in coordination with the original brand owner/ registered in Pakistan.
Valuation ruling should be issued in consultation with the owner of the brand or its authorized representative.
The data of import should be public (restrictively) to ensure transparency and this will also help in taking over of goods under section 25A of the Custom Act, 1969.
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FBR notifies elimination, reduction of regulatory duties on several raw materials; issues SRO
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FBR advised reducing income tax to half for exporters other than five zero-rated sectors
KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce the income tax rate to half for exporters not falling under five zero-rating scheme in order to promote and diversification of exports.
Pakistan Business Council (PBC) in its tax proposals for forthcoming budget 2019/2020 said that at present the rate of tax deduction on export proceeds under Section 154 of Income Tax Ordinance, 2001 is one percent, which is same as for five export oriented sector as well as for other than five sectors.
The council said that in order to promote diversification of exports instead of relying on only five specified sectors, rate of tax on export proceeds should be reduced to 0.5 percent from one percent for sectors which are not covered under the five specified export oriented sectors.
Giving rationale for the change, it said that at present sales tax zero rating is available to five specified export oriented sectors on their input materials whereas such benefit is not available to other potential export sectors.
Moreover, gas supply is also available to five specified sectors at 600/MMBTU whereas rate of gas per MMBTU for non-conventional sectors is Rs780 in addition to GIDC, which makes potential export uncompetitive and consequently, Pakistan is unable to diversify export markets.
“In order to compensate such exporters and to promote export of other than five sectors, rate should be decreased to five percent for such sectors,” the PBC recommended.
The PBC further pointed out that manufacturing bond/DTRE rules are cumbersome and in certain cases lack clarity whereby many potential exporters cannot avail them. Consequently, it results in lost exports.
Therefore, it is recommended that manufacturing bond/DTRE rules should be modified to make it easily accessible and lend full clarity to allow exporters to fulfill potential export orders.
The proposed amendment would increase exports by facilitating existing and potential exporters.
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OICCI welcomes Shabbar Zaidi’s appointment as FBR chairman
KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI), has appreciated the appointment of tax expert Shabbar Zaidi as Chairman of the Federal Board of Revenue (FBR), a statement said on Wednesday.
The OICCI President, Shazia Syed commenting on the appointment said “Shabbar Zaidi, is a well-respected tax professional, who has been closely associated with tax policy and administration in Pakistan for many years.
The appointment of Shabbar Zaidi as FBR Chairman by the government is very commendable as it will strengthen the FBR capacity substantially.”
Shazia was confident that “with full support from a well experienced and large FBR team, the new FBR Chairman will be able to lead the needed transformation of the tax culture and significantly boost the tax collection, in line with the true revenue potential of the economy.”
The OICCI reminded that in the World Bank’s 2019 Ease of Doing Business (EODB) rating, Pakistan was assessed as the 17th worst country in the world on the parameter of ‘paying taxes’.
The OICCI is hopeful that with a rejuvenated FBR, supported by a close coordination among the provincial tax authorities, and government’s clear direction to improve on EODB, the country will significantly improve its EODB rating.
The recently concluded IMF–Pakistan staff level agreement also recommends tangible actions to revamp the tax regime and boost the tax to GDP ratio in line with the relevant international standards.
OICCI members comprising of leading multinationals operating in Pakistan contribute about one third of the total tax collection, the highest by any trade body.
OICCI has already submitted a series of progressive taxation proposals for the 2019-20 Fiscal Budget to FBR and provincial revenue authorities mainly focusing on facilitating investment and growth in the economy, including need for longer term incentives to boost FDI in the large greenfield and job creating manufacturing facilities, and ensuring implementation of predictable, consistent and transparent policies.
OICCI has also strongly urged for Revamping of Withholding Tax Regime from current over 50 sub-clauses/provisions to less than ten, with number of tax rates reduced substantially, better coordination between Federal and Provincial Legislations, with policies and tax rates harmonized across all jurisdictions, integration of all revenue authorities in such a way that each Authority remains functional but with one window solution for filing a simplified single return for both Federal and Provincial Taxes.
OICCI has also shown serious concern on the booming illicit trade with significant damage to revenue base of the economy and urged the authorities to re-visit Afghan Transit Trade agreement supported by structural reforms in Customs to stop the highly visible availability of smuggled foreign FMCG products.
OICCI has also given workable recommendations, including the use of IT technology, for substantially improving the Documentation of the economy and Broadening of Tax Base, besides reducing the frequency of interaction of the tax officials with the compliant tax payer.
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KCCI praises Imran Khan for providing relief to tax evaders through amnesty scheme
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has praised Prime Minister Imran Khan for giving opportunity to tax evaders to document their black money at very low tax rates.
KCCI President Junaid Esmail Makda stressed that in order to make the amnesty scheme successful, the government will have to ensure complete secrecy and confidentiality of the declarants’ data at any cost otherwise, they will not be able to achieve the desired results.
He said that this amnesty scheme must not end up like the last one in which the highly classified data of those individuals who availed the previous amnesty scheme was shared with several government agencies including Federal Investigation Agency (FIA) and National Accountability Bureau (NAB) against the commitment to keep declarants’ info confidential.
Referring to government’s assurance to keep this scheme easy to understand, he hoped that the amnesty scheme has been devised in such a manner that number of queries are kept minimal as it is a well-known fact that individuals will be reluctant to respond to excessive queries seeking details about the source of income and other such questions because of fears of getting into any kind of trouble in future.
“The business community will be more than happy to become part of the documented economy but the government has to support them by protecting them from any kind of harassment from agencies/ institutions”, he added.
He further stated that although the government has provided the opportunity to become part of the scheme until June 30 but this scheme must be extended for a longer period.
After seeing the failure of previous amnesty scheme in which harassment by serving notices was widely witnessed, many individuals will be reluctant to declare their assets hence, the government must extend it and also has to take confidence building measures in due course to regain the trust of the masses.
“After seeing some success stories of those individuals who avail this year’s amnesty scheme, I am sure many others will also come forward to benefit from the amnesty scheme so it must be made available for a longer period to tap such individuals”, he added.
He was fairly optimistic that the scheme will help the government in bringing undocumented persons, assets and income into the documented sector. The scheme has the potential to bring in macroeconomic and fiscal stability in the economy.
President KCCI further stated that this scheme offers a lucrative opportunity to pay just 4 percent for legalizing Benami Assets within the country and 6 percent for assets outside the country while 3 percent tax for undeclared sales which was a good offer for whitening the black money.
While complimenting Chairman FBR Shabbar Zaidi for taking pro-business steps, Junaid Makda hoped that he would continue to do so throughout his tenure which would help in restoring the confidence of business community to a great extent and that in turn would lead to economic prosperity for the entire country.
He advised Chairman FBR to formulate practical policies to increase the tax net and catch tax evaders in order to strengthen the country’s economy.
The loyal taxpayers are being overburdened every year to achieve the revenue targets whereas those outside the tax net continue to enjoy all the luxuries of life without contributing a single rupee to the national exchequer, he opined, adding that FBR has been claiming of having details of all such tax evaders since many years but unfortunately no action has been taken so far to strictly deal with them.