Category: Trade & Industry

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

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at 5 percent customs duty and zero percent sales tax under SRO 575, however, through Finance Act, 2015, this SRO was rescinded and consequently, the customs duties on network equipment have been increased from 5 percent to 20 percent and sales tax exemption has been removed.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.

May 18, 2019
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.

Related Stories

FBR notifies elimination, reduction of regulatory duties on several raw materials; issues SRO

May 18, 2019
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.

May 17, 2019
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.

May 16, 2019
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.

May 15, 2019
FPCCI invites FBR chairman for budget proposals discussions

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has invited Shabbar Zaidi, Chairman of Federal Board of Revenue (FBR) to discuss budget proposals.

A statement issued on Tuesday said that the President FPCCI Engr. Daroo Khan Achakzai alongwith Abdul Waheed Sheikh, Ijaz Khan Abbasi, Qurban Ali and Shireen Arshad Khan, Vice Presidents of FPCCI visited the office of Shabbar Zaidi congratulating him on assuming the charge of Chairman FBR.

During the meeting the President FPCCI discussed various measures and proposals particularly for enhancement in number of tax payers and to increase their confidence level to achieve the set targets of revenues.

Engr. Daroo Khan Achakzai further said that misuse of powers by the tax authorities is creating trust deficit and lack of confidence.

The FPCCI Chief hailed the prompt decisions taken by the FBR’s Chairman in facilitating and providing relief to the taxpayers such as “Suspension of raid on any premises of any existing taxpayer without prior approval of Member IR – Operation and Chairman FBR”.

Moreover, the FPCCI President also appreciated the Chairman FBR for not suspending any Active Taxpayer from Active Taxpayer List unless there is personal interaction with the assessee 24 hours before suspension and monitoring himself the list of all cases of suspension. The President of FPCCI also lauded Shabbar Zaidi, Chairman, FBR for not freezing bank account without prior intimation and notice to the bank account holder. The FBR Chief further said that the real estate is fast growing sector of the economy and FBR will devise various reforms. The tax amnesty scheme is also under process and will be announced soon, he stated.

The President FPCCI Engr. Daroo Khan Achakzai invited the Chairman FBR to visit FPCCI Headquarter at Karachi and its Capital Office Islamabad to discuss FPCCI’s budget proposals and to share vision to revamp the tax system and machinery which is now the need of hour to be shifted in effective automated system to facilitate the taxpayers.

The Chairman FBR agreed to visit the FPCCI soon to get feedback and first-hand information from FPCCI members and apprised them of FBR’s stance / point of view.

May 14, 2019
President asks business community to pay all taxes for curtailing budget deficit

President of Pakistan, Dr. Arif Alvi, has called upon the business community to fulfill their tax obligations, emphasizing that this would play a pivotal role in reducing the budget deficit and enabling greater allocation of funds for development projects. His remarks came during a meeting with a delegation from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Regional Office, Lahore, in Islamabad on Monday.
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May 14, 2019
FPCCI praises FBR chairman for limiting powers of IR officers

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has praised the newly appointed chairman of Federal Board of Revenue (FBR) for limiting powers of Inland Revenue officers in tax recovery through bank account attachment.

Engr. Daroo Khan Achakzai, President FPCCI in a statement on Saturday hailed the directive of the newly appointed Chairman FBR Shabbar Zaidi, for not attaching the bank account of a taxpayer unless his Chief Executive Officer / Owner is informed at least 24 hours prior to attachment and approval of the Chairman FBR is obtained.

He said that the FPCCI had been clamoring for long for keeping a deterrent against the misuse of discretionary powers by the tax officials for recovery of arrears and attachment of bank account under Section 48 of Sales Tax Act, 1990 and Section 140 of Income Tax Ordinance 2001.

The FPCCI Chief elaborated that there were increased incidences of bank account attachment and other serious coercive measures taken by the tax officer under the garb of the Section 48 for recovery of arrears and such abuse of powers were creating trust deficit and lack of confidence of taxpayers in law which are pre-requisite for success of any scheme.

Achakzai hoped that the directive would address the complaints of business community about the unnecessary attachments of the bank accounts for recovery of the disputed accounts from the bank accounts of the taxpayers without fulfilment of legal process. “In many cases accounts have been attached without prior notice of the CEO / principle officer owner of the business community,” he added.

May 11, 2019
Karachi Chamber welcomes restricting FBR officers for freezing taxpayers’ bank accounts

KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has warmly welcomed the first order issued by the newly appointed Chairman Federal Board of Revenue (FBR) Shabbar Zaidi immediately after assuming charge in which all the Commissioners Inland Revenue have been barred from freezing bank accounts which was being demanded by KCCI since long.

President KCCI Junaid Makda termed the order as ‘pro-business move’ and the first step in the right direction which would not only help in restoring the lost confidence of the business & industrial community but would also prove to be favorable for the economy as after seeing such pro-business initiatives, many individuals would prefer to come into the tax net, which would result in documenting the economy and improving the country’s lowest tax-to-GDP ratio.

In a statement issued, Junaid Makda pointed out that by virtue of this order, it would be mandatory for all Commissioners of Inland Revenue to obtain permission from Chairman FBR prior to freezing any bank account while at least 24 hour prior notice will also be served to the owner of the bank account which the business and industrial community highly appreciates.

He said that the Karachi Chamber had struggled a lot and has been vocally raising voice against massive discretionary powers which have been bestowed to FBR officers even at lower level, intensifying the hardships for the loyal taxpayers.

“As the first step in the right direction has been taken, we, the business and industrial community of Karachi, expect more such moves in near future. We firmly believe that massive discretionary powers have to be curtailed which is the only way forward to improve revenue collection, ensure economic prosperity and make FBR a taxpayers’ friendly institution”, he added.

While extending felicitation to Shabbar Zaidi, President KCCI advised Chairman FBR to remain steadfast and keep on taking such bold steps which are in the larger interest of the country and the business community.

Junaid Makda also extended Karachi Chamber’s full support and cooperation to Chairman FBR for all his future endeavors towards improving the existing taxation system of the country which is in really bad shape.

He hoped that the newly appointed Chairman FBR would also review and take KCCI’s Budget Proposals into consideration which have been compiled after taking inputs from all the stakeholders.

“KCCI’s Budget Proposals have been delineated after intense brainstorming as we wanted to ensure that all our recommendations for Federal Budget 2019-20 are devised in such a manner that they prove to be favorable for the economy and ensure an enabling business environment for the entire business & industrial community of Pakistan”, he added.

May 11, 2019
Omitting condition on input sales tax claim proposed where tax unpaid by supplier

KARACHI: Pakistan Business Council (PBC) has suggested to omitting the condition of disallowing input tax adjustment where tax unpaid by supplier.

In its tax proposals for budget 2019/2020, the PBC said that according to Section 8(1)(ca) of Sales Tax Act, 1990, input sales tax is not allowed where tax unpaid by supplier.

“A taxpayer is not entitled to claim input tax paid on the goods (or services) in respect of which sales tax has not been deposited in the government treasury by the respective suppliers.

The PBC said that this provision needs to be omitted especially after the implantation of the STRIVe system.

Giving rationale to the proposal, it said that the matter was challenged in the Lahore High Court (LHC), in a petition W.P.No.3515/2012 filed by D.G Khan Cement Company Limited.

LHC permitted relief and declared the provision as unconstitutional.

“With the implementation of the STRIVe system this is redundant,” the PBC said.

The PBC further said that based on the Doctrine of Revenue Neutrality and plethora of judgments of superior courts, it is now a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.

However, unfortunately, such provision is not part of the Sales Tax Act, 1990.

It proposed that Sub-Section 4B should be inserted in Section 11 of the Sales Tax Act with the purpose of introducing “doctrine of revenue neutrality”.

It is a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.

Proposed insertion in Section 11 of the Sales Tax Act 1990:

“(4B) Where at the time of recovery of sales tax under sub-section (1), (2), (3), or (4) and (4A), it is established that the sales tax that was required to be paid has been meanwhile been paid by that person or recovered from the supply chain, no recovery shall be made from the person who had failed pay the sales tax or had paid short-amount of sales tax.”

May 11, 2019