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.
In its proposals for the upcoming budget 2021/2022, the KCCI highlighted concerns over the misuse of powers granted under Section 38B of the Sales Tax Act, 1990.
The chamber emphasized that the recent spate of raids and surprise inspections on the premises of compliant and registered taxpayers, conducted without prior notices or intimations, has led to increased harassment of these taxpayers. Furthermore, it argued that such actions only serve to create opportunities for under-the-table transactions and bribes, fostering a breeding ground for corruption. This not only undermines the integrity of the tax system but also acts as a deterrent for businesses to willingly participate in the formal tax structure.
The KCCI proposes a strategic shift in the focus of tax authorities, urging them to target unregistered individuals engaged in undeclared assets and undocumented high-volume business activities. The chamber suggests that directing efforts towards bringing these entities into the tax net would be more fruitful than continuously targeting already registered businesses. Such a change, according to the KCCI, would not only curb corruption but also encourage more businesses to voluntarily register for Sales Tax or Income Tax without fear of unwarranted scrutiny.
The specific powers granted under Section 38B of the Sales Tax Act are singled out by the KCCI for reconsideration. The chamber recommends either withdrawing or amending these powers to be exclusively used for the purpose of broadening the tax base. It argues that the current uneven and flawed tax structure, encompassing Sales Tax, Value Added Sales Tax, and Further Tax, is at the root of many problems. A comprehensive reform, the KCCI suggests, should prioritize making compliance for registered persons more straightforward, thus reducing the need for intrusive and disruptive raids.
The rationale behind the KCCI’s proposals is grounded in the belief that a shift in focus toward unregistered entities would not only prevent the unnecessary harassment of compliant taxpayers but also contribute to the broader goal of expanding the tax base. By encouraging a more inclusive and less punitive tax environment, the chamber believes that corruption can be minimized, fostering an atmosphere where businesses are incentivized to participate in the formal taxation framework willingly.
As discussions for the budget 2021/2022 continue, these proposals from the KCCI add an important voice to the ongoing dialogue surrounding tax policies and enforcement strategies in Pakistan. The hope is that these recommendations will be seriously considered for the betterment of both the business community and the overall economic landscape.
