KARACHI: Federal Board of Revenue (FBR) has been proposed to reduce the general rate of minimum tax to 0.25 per cent.
The Overseas Investor Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 advised the FBR to review minimum tax regime (MTR) / abolish alternative corporate tax (ACT) under Section 113 and 113C of Income Tax Ordinance, 2001.
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The OICCI recommended that the general rate of Minimum Tax under section 113 of ITO 2001 should be reduced to 0.25 per cent.
For businesses dealing in sectors with high turnover and low margins, (eg. Oil Marketing/ Refineries/ LNG Terminal Operators, large chemical companies, authorized dealers of local vehicle manufacturers, distributors, and traders, including large trading houses), this rate should be applicable on gross profits instead of turnover.
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All streams of income including income of commercial importers should be taxed under the normal tax regime. Special tax regimes should only be restricted to non-corporate or in-active taxpayers.
Alternative Corporate Tax under section 113C should be abolished in presence of Minimum Tax under section 113.
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The OICCI earlier proposed that the FBR should continue the previously announced policy to annually reduce the tax rate from 29 per cent to eventually to rate of 25 per cent, including banking companies.
The corporate tax rate in Pakistan, at 29 per cent is higher than most of the regional countries, as can be noted from the table here.
Companies are required to pay various taxes in addition of income tax i.e., WWF (2 per cent), WPPF (5 per cent), Stamp Duty, Infra structure Cess (1.2 per cent) etc. which ultimately result in effective tax rate of around 35 per cent to 45 per cent which is far greater than effective tax rates of other countries in the region.
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