KARACHI: Pakistan Business Council (PBC) has recommended suspending minimum tax under Section 113 of Income Tax Ordinance, 2001 considering the pandemic of COVID-19 and its impact on businesses.
The PBC in its budget proposals 2020/2021, said that a turnover based minimum tax is fundamentally flawed in that it fails to take account of the industry specific margins and acts as a barrier to entry of new players.
A minimum tax at 1.5 percent of sales for manufacturers (and higher rates for the services industry), under the present depressed business conditions will put an unbearable burden on businesses.
“Pending a review of the continued justification of minimum tax, under the current business circumstances, we recommend that its collection be suspended for at least the next two financial years.”
The PBC further said that as per Section 61 of the Income Tax Ordinance, 2001, persons falling under the Minimum Tax Regime / Alternative Corporate Tax are not able to claim any sort of tax credit on donations.
Considering the situation of last quarter ending June 2020 due to COVID, many companies would fall under the minimum tax regime due to reduced product demand and margin issues.
Section 61 of the Income Tax Ordinance, 2001 be amended to allow direct deduction of donations paid by any person to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 or any other Fund established by any Provincial Government or to any other approved Non-Profit Organization subject to the condition that the said donation should be made through crossed cheque.
Moreover, in case of donation in kind, deduction against minimum turnover tax be allowed on the basis of valuation prescribed under Rule 228(4) of the Income Tax Rules, 2002.
At present, rate of tax deduction on export proceeds is 1.0 percent.
In order to promote sustainability of industries engaged in exports, rate of tax on export proceeds should be reduced to 0.5 percent from 1.0 percent for the next two financial years.
In order to get exemption certificate against tax deduction under sections 153 [supply of goods] and 148 [import on goods], taxpayers are required to pay advance tax
Taxpayers should be allowed unconditional exemption from tax deduction on import and supply stage without heavy upfront payment of advance tax liability. In order to ensure regular inflows to the Government, taxpayers be made liable to discharge at least 70 percent [as against present 90 percent condition] of total estimated annual tax liability in 4 quarterly instalments.