KARACHI: Federal Board of Revenue (FBR) has been proposed to reduce the general rate of minimum tax to 0.5 percent in the upcoming budget 2020/2021.
In its proposals for budget 2020/2021, the Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended to review minimum tax regime.
It said that standard rate of minimum tax under section 113 of Income Tax Ordinance, 2001 (ITO 2001) was enhanced from 1.25 percent to 1.50 percent through Finance Act 2019, whereas, reduced rate of minimum tax also prevails for specified sectors.
The application of MTR is resulting in an effective tax rate which is even higher than the standard rate for nearly all companies of specialized sectors with high turnover and low margins or regulated prices.
Further, Alternate Corporate Tax is a discriminatory regime, which hurts industries with major capital investment.
The OICCI recommended the following:
i. The general rate of Minimum Tax under section 113 of ITO 2001 should be reduced to 0.5 percent.
ii. Minimum Tax rate should be reduced to 0.2 percent for Oil Marketing/ Refineries/ LNG Terminal Operators, large chemical companies, authorized dealers of local vehicle manufacturers and traders, including large trading houses, dealing in sectors with high turnover and low margins.
Minimum tax should be adjustable against future tax liabilities for next 6 years.
iii. Minimum tax liability should be computed in comparison with normal tax liability without taking into account any initial depreciation allowance.
iv. Alternate Corporate Tax under section 113C should be abolished in presence of Minimum Tax under section 113.