KARACHI: Businesses have suggested the tax authorities for integration of tax laws for filing unified tax returns for sales tax in order to facilitate taxpayers, who are operating more than one jurisdiction.
Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 said that presently tax collection/ administration has been split between various authorities at Federal/Provincial level and even small size taxpayers have to deal with more than one tax collecting authority.
Tax compliances for businesses has increased after 18th amendment which has also deteriorated Pakistan’s rating in terms of paying taxes over the years.
While the tax policies will be developed at provincial and Federal level separately, steps should be taken to ensure tax administration and collection through one authority.
This will provide a holistic view to the tax authority on the tax matters whereas simplify the compliance process for taxpayers as well.
The OICCI recommended:
i. Integration of tax data should be ensured at all levels through one return including Federal and Provincial, STRIVE should be implemented at provincial level also and FBR should allow integration with Federal return.
ii. Departure from VAT mode of taxation should be discouraged at all levels. Give examples of ‘not VAT taxation’
iii. FBR IT/Data integration system should be upgraded and all taxes withheld should be auto populated in the portal to the credit of the beneficiary. This will simplify;
a) The reconciliations carried out at the taxpayer’s / FBR’s level,
b) Simplify the tax return submission process.
c) Enhance system based auditing capability of FBR while providing opportunity of self-verification to the beneficiaries and quick tracking of the in-actives.
The data is already available with FBR and it just needs to be available to taxpayers with an up gradation of the system.
The OICCI also suggested following for coordination between federal and provincial legislations:
i. Synchronization of Sales tax rates and policies need to be harmonized across all jurisdiction and sectors and should be closely aligned with the regional benchmark of 12 percent sales tax rate.
ii. The Federal WWF & WPPF law should be updated based on the recent apex court’s judgments, provincial enactments and current minimum wage levels. Currently neither the FBR nor the provincial revenue authorities, like PRA, SRB, are receiving the complete revenue stream under these heads.
a. Sections 60A and 60B should appropriately be amended to allow deduction against provincial laws of WWF and WPPF.
b. Clarity should be inserted in respective laws regarding the basis of allocation of WWF/WPPF charge where the taxpayer is having industrial establishment in more than one province.
iii. One authority to collect all types of federal and provincial taxes for onward transmission to respective revenue authorities within the country without burdening the business entities. Single sales tax return should be filed with FBR instead of separate sales tax returns for each Province.
iv. The provincial taxes should be consolidated specially the labor levies e.g. EOBI/SESSI/WPPF/WWF as mentioned above.
v. Controversies arising as to jurisdiction of authority to charge and collect tax on certain services should be resolved.
vi. Special attention be given to tax implication arising on emerging e-business models and asset-free web service providers who act as coordinator between supplier and buyer. Mechanism for sales tax and income tax application for such models should be in place to promote the industry.