KARACHI: Pakistan Business Council (PBC) has suggested the Federal Board of Revenue (FBR) to lower the corporate tax rates, especially for listed companies.
The PBC in its proposals for budget 2022/2023 recommended reduction in corporate tax rate to 20 per cent.
The council in its proposals for reducing the cost of doing business in Pakistan, said all companies except banking companies and companies defined in section 2 of Income Tax Ordinance, 2001 are subject to be taxed at 29 per cent on taxable income
It recommended that the rate of income tax on companies should be gradually reduced to 20 per cent to align with the taxation rate of other countries in the region.
Listed companies should be given the first benefit of the lower taxation rates as compared to other companies to further encourage transparency and documentation.
The PBC said that through section 113C of Income Tax Ordinance, 2001 Alternate Corporate Tax (ACT) was imposed on companies at the rate of 17 per cent on accounting profits.
It recommended that Section 113C should be abolished as there is already minimum tax on goods and services
The council further said that currently under Section 154(3B) of the Ordinance, every direct exporter and an export house registered under the Duty and Tax Remission for Exports Rules, 2001 provided in Sub -Chapter 7 of Chapter XII of the Customs Rules, 2001 shall, at the time of making payment for a firm contract to an indirect exporter shall deduct tax at 1 per cent of the payment made.
“This 1 per cent tax deduction shall be considered as final tax on the income of the indirect exporter. This clause should be extended to all exporters under various schemes like EFS, EOU etc. to remove differential treatment under various export schemes,” it recommended.
The Commissioner has been empowered to modify the withholding tax recovery order, companies would thus be required to maintain records and details for an indefinite period of time. Failure to provide such records could be used as a tool by the tax authorities to create undue tax demands in order to achieve their revenue targets.
Sub-section (3) of Section 161 should be omitted for avoiding record retention for unlimited period. The limitation of time be provided under the law for initiating and concluding the monitoring of withholding tax proceedings, like those for non-monitoring proceedings which is also important for harmonization.
Section 15A(1)(h) of Income Tax Ordinance 2001. As per Finance Act 2020, deductibility of administrative collection charges has been restricted to 4 per cent of revenue as compared to 6 per cent previously.
Renting of property is also a business and various administrative and collection charges are incurred which normally exceed even the 6 per cent threshold.
The allowable threshold should be allowed on actual basis as is the case in other sources of income or at the very least be restored to 6 per cent of gross rental revenue