Tag: ACCA

Sales tax rate in Pakistan highest in region: ACCA

KARACHI: Association of Chartered Certified Accountants (ACCA) has said that the existing sales tax rate of 17 percent in Pakistan is the highest in the region.

The existing rate of Sales Tax at 17 percent is one of the highest in the region with an average of around 12 percent in Asia (15 percent in India and Bangladesh, 10 percent in Indonesia and just 6 percent in Malaysia), ACCA said in its tax proposals for budget 2019/2020.

Sales Tax should be used to broaden the tax base and not as a replacement of direct taxation.

In order to avoid the net negative costs for the economy, the rate should be brought down to single digit in a phased manner with a proposed reduction to 14 percent.

The association also recommended harmonization of inter-provincial and federal-provincial taxation for avoiding double taxation.

It said that the conflicts between various provincial revenue authorities and the federation are resulting in double taxation of services owing to the classification and jurisdiction disputes.

Also, standardizing the applicable rates while also reducing them could facilitate the businesses while also increasing the tax revenues simultaneously.

Similarly, the lack of inter-provincial harmonization also results in double taxation of services owing to the classification and jurisdiction disputes.

These issues should be resolved to create a business-friendly environment and facilitate the tax-payers.

Point of origination or deliverance of services can be agreed upon by all revenue authorities as the basis of classification and the resulting jurisdiction to resolve the major inconvenience to the taxpayers.

The ACCA highlighted the issue of adjustable input tax and said with the introduction of the STRIVE system resulting online matching of invoices, the chances of sales tax fraud and/or error have been minimized.

Therefore the current restriction of limiting the input tax adjustment to 90 percent (ninety percent) of the output tax is outdated and needs to be abolished.

This will be in line with the principles of fairness, equity and justice for all and help restore the confidence of businesses.

The association also pointed out revision of sales tax return and said this should be made easy and automated as with the STRIVE system in place, chance of tax fraud are minimized to the maximum possible extent as claimed by FBR.

It further pointed out that in line with the principles of fairness, equity and justice for all, the appeals should be heard by a person not under the administrative jurisdiction/influence of FBR.

May 17, 2019
FBR advised making declaration of fund source mandatory for foreign remittances

KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the declaration of source of funds for foreign remittances.

Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 recommended changes to Section 111(4) of Income Tax Ordinance, 2001 regarding foreign exchange remitted from outside Pakistan.

The association recommended amendment:

“to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect … and a declaration along-with evidence of the source of funds.”

It said that this will continue to promote the inflow of foreign exchange remittances towards the country while stopping the misuse of the provision to whiten/launder black monies and de-incentivizing genuine tax paying businesses.

“This way, the ‘non enquiry’ clause which has been extensively abused, will be abolished sans the current monetary limit while still retaining the tax relief for foreign exchange remittance.

The ACCA further said that the minimum tax on turnover is charged irrespective of the net profit or loss.

This often gives rise to a situation where businesses end up paying double taxes on their revenues and profits as well as loss making businesses facing additional cash-flow pressures by paying this tax.

The current rate of 1.25 percent applicable generally except for a few sectors, should be brought down to 0.4 percent.

The now deleted exception in case of a gross loss needs to be reinstated in line with the principles of natural justice and equity.

This will facilitate the business eco-system contributing to a growth in GPD which can lead to increased revenue collections for the treasury.

The association further highlighted Section 138 and 140 of the Ordinance regarding recovery of tax through attachment of bank accounts and/or property or arrest.

It said that currently, the allowance for the commissioner to attach the property of the taxpayer before expiry of notice period on “satisfaction” of the commissioner regarding possible removal, cancellation or disposal of attachable property is misused in many cases to harass the businesses.

This change can bring an end to this, increase taxpayers’ trust in the tax apparatus and improve the ease of doing business in the country.

“Any such attachment of any movable/immovable property before expiry of the notice period may only be authorized by the Commissioner in the presence of objective evidence, which should be shared with the taxpayer.”

May 14, 2019
ACCA opposes tax amnesty, recommends enforcement on available information

KARACHI: Association of Chartered Certified Accountants (ACCA) Pakistan has opposed tax amnesties and suggested the tax machinery to use available information with proper enforcement.

“Tax Amnesties without proper penal clauses had been a failure. With the strengthening of OECD, they should be done away with and focus should instead be shifted on using the organization’s platform to retrieve necessary information and ensure proper enforcement of applicable laws and regulations,” the association recommended this in its tax proposals for budget 2019/2020.

ACCA has presented detailed recommendations for bringing structural reforms in the taxation system while opposing any amnesty scheme in the presence of plethora of information maintained by the Federal Board of Revenue.

For the structural reforms following measures have been suggested by the ACCA:

• A single tax return for all taxation affairs of a taxpayer which all authorities can utilize to obtain the relevant data.

• Harmonization of taxation laws in the country.

• Resolving issues within IRIS to make it more user friendly

• Integration of Federal and Provincial Revenue Authorities’ systems and databases

Structural Reforms

• Reducing the discretionary powers vested in FBR officials and shifting towards an objective criteria based approach

• Developing the existing policy of differential tax treatments and incentives for filers while penalizing non-filers

• Introducing impact on economic sectors (GDP development) and numbers of decisions upheld at the appellate forums along with collections target as a performance evaluation criteria for FBR functionaries

• Ensuring time limits adherence as specified in the laws and rules particularly pertaining to refund matters

• Facilitating the tax payers

• Introducing confidence by establishing a swift response complaint resolution cell to deal with corruption and harassment of tax payers

• Change in discretionary powers of FBR for moveable and/or immovable property including bank accounts attachment to improve ease of doing business and trust of taxpayers in the tax apparatus. Limit the attachment powers to only cases involving concrete information re asset disposal.

• Ensuring no post remains vacant for more than two weeks to avoid delays in resolving tax-payers issues arising out of transfers, postings and additional charges, etc.

• Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

• Effective enforcement should be ensured by working on maximum automation of the taxation system.

• Effective enforcement should be ensured by working on maximum automation of the taxation system.

• Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

• Appointing independent officials as Commissioner Appeals ideally from the judicial service and qualified accountants practicing taxation from various bodies including ACCA.

• ACCA is the largest Global accountancy body, which is now the largest in Pakistan too. Including ACCA members practicing taxation within the definition of accountant members for the Appellate Tribunal Inland Revenue will further strengthen the competition and meritocracy.

• Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

• Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

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May 12, 2019
ACCA suggests making FBR immovable property values in line with fair market value to stop asset undervaluation

KARACHI: Association of Chartered Certified Accountants (ACCA) Pakistan has urged the Federal Board of Revenue (FBR) to bring the immovable property values in line with fair market values to discourage under-valued asset declarations.
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May 9, 2019