ISLAMABAD: The Federal Board of Revenue (FBR) has opened the door for proposals to amend laws related to sales tax and Federal Excise Duty (FED) as part of the upcoming budget for the fiscal year 2023-2024.
(more…)Tag: budget proposals
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FBR seeks proposals to eliminate exemption, concessions in income tax
ISLAMABAD: The Federal Board of Revenue (FBR) has called for proposals to eliminate exemptions and concessions under income tax laws as part of the formulation process for the budget 2023-2024.
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SRB invites proposals for budget 2023-2024
KARACHI: Sindh Revenue Board (SRB) has invited proposals for budget 2023-2024 and advised stakeholders to send their recommendations by January 27, 2023.
In a notification issued on Tuesday, the SRB said that it had invited proposals in relation to the Sindh Sales Tax on Services Act, 2011 and the Rules and Notifications issued thereunder.
The provincial revenue body said that it was in the process of formulating budgetary proposals (for the Sindh Budget 2023-2024) in relation to taxation and procedural provisions of Sindh Sales Tax on Services Act, 2011, The Sindh Sales Tax on Services Rules, 2011, the Sindh Sales Tax Special Procedures (Withholding) Rules, 2014, the Sindh Sales Tax Special Procedure (Transportation or Carriage of Petroleum Oil through Oil Tankers) Rules, 2018, the Sindh Sales Tax Special Procedure (Services provided or rendered by cab aggregator and the services provided or rendered by the owners or drivers of the motor vehicles using the cab aggregator services) Rules, 2019 and Sindh Sales Tax Special Procedure (Online Integration of Business) Rules, 2022 and other various notifications issued under the said Act, 2011.
It has been a policy of the SRB to consult all chambers, associations, groups, stakeholders and taxpayers before finalizing the budget proposals.
With this end in view, the SRB requests all persons (including the chambers of commerce and industry, business councils, trade associations, tax bars, Institute of Chartered Accountants, Institute of Cost and Management Accountants, taxpayers etc.) to send written proposals in the given format urgently so as to reach through e-mail (followed by its hard copy to be sent by post / courier) latest by Friday, January 27, 2023.
The SRB asked the stakeholders to provide proposals in the format included: name of the act/rules/notification proposed to be amended; section no., schedule no., tariff heading no., rule no., para no., involved; existing provisions/rates of tax/ proposed provisions/rates of tax; reasons and rationale for the proposal; and estimated revenue effect, (if any).
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Pakistan may increase normal sales tax rate to 18%
Pakistan is likely to increase sales tax rate to 18 per cent in the federal budget 2022-2023, which is scheduled on June 10, 2022. The existing normal sales tax rate is 17 per cent.
According to Budget Preview 2022/2023 issued on Thursday, analysts at Arif Habib Limited said the government is considering to raise an additional Rs400 billion – Rs450 billion during next fiscal year 2022/2023.
READ MORE: PM Shehbaz assures favorable measures on CNIC requirement
For this purpose, the analysts said, the government plans to raise revenue from the following measures:
- Increase in general sales tax (GST) from 17 per cent to 18 per cent
- Increase in GST on fertilizer products from 2 per cent to 17 per cent
- Increase in corporate tax rate / windfall levy by 3 per cent
- Incremental super tax of 3 per cent on commercial banks
- Increase in personal income tax
- Increase in federal excise duty (FED) by Rs 500/ ton on cement
- Increase in FED on tobacco
- Increase in Customs Duty from 2 per cent to 6 per cent on edible oil imports
- FBR’s administrative measures
- Imposition of additional taxes on real estate.
The analysts said that the fiscal policy should remain supportive of the economy in the short term, with targeted measures to collect tax and reduce expenditure, backed by credible medium –term fiscal consolidation plan.
READ MORE: New tax measures likely in budget 2022-2023
“However, in short term, need of the hour is taking tough fiscal measures given the tight fiscal situation.”
Pakistan achieved total revenue growth of 18 per cent during the first nine months (July – March) 2021/2022 to Rs5.4 trillion up from Rs4.6 trillion in the corresponding months of the last fiscal year, which comes out to be 9.2 per cent of the GDP against 9 per cent in the same period last year.
The analysts said that the total tax revenue collection was up by 33 per cent year on year (YoY) to Rs4.82 trillion while non-tax revenue of Rs1.05 trillion, displayed a decline of 14 per cent YoY.
READ MORE: Pakistan Budget 2022-2023 – estimates
The government expects the tax revenue collection to settle at Rs 7.9 trillion for FY23b, a jump of 19 per cent YoY compared to tax revenue of pKR 6.6 billion for FY22E. Likewise, to ensure prudent fiscal management, IMF also proposed stringent FBR tax revenue target of Rs 7.26 trillion compared to Rs 6.1 trillion for FY22E, which is much needed given the overall fiscal situation of the economy. Also, from the government’s standpoint, in order to ensure growth moderation, the analyts believe that the government will not shy away from putting additional major tax burden on the different economic classes of the community and might take some non-populous taxation measures in order to ensure the same.
The government is planning to raise an enormous total tax collection target of Rs 7.9 trillion through new taxes worth Rs 400-450 billion, additional taxes on higher income salary bracket, raising Rs 4.7 trillion through indirect tax measures, and the rest is likely to be collected from administrative measures and by bringing more people under the tax net. They believe direct tax collection will likely increase due to broadening tax base as government would be targeting to increase the number of income tax filers in the upcoming year.
READ MORE: Compliance cost much higher for corporatization: PSX
Indirect tax contributes around 60 per cent to the overall tax revenue coming in mainly from three major heads including Custom Duty, Sales tax and Federal Excise Duty which contributed around 25 per cent, 67 per cent and 8 per cent, respectively to the total indirect tax collection during 9MFY22. Share of sales tax and custom duty increased in 9MFY22 due to surge in imports of various commodities amid an uptick in aggregate demand of the economy. Going forward, indirect tax contribution is likely to increase by almost 20 per cent (Rs 4.7 trillion) in FY23B due to higher sales tax while higher import bill is likely to earn more tax revenue from custom duties.
Government expects non-tax revenue collection to increase by 12 per cent to Rs 1.6 trillion in FY23 with Petroleum Development Levy (PDL) expected to settle at around Rs 500 billion. The analysts at Arif Habib Limited believe the collection in lieu of PDL is likely to be higher YoY in FY23 with an assumption that government increases it by Rs – 22/litre on MS and HSD. Currently PDL stands at Rs 125 billion during 9MFY22. Another constituent that is likely to support the overall non-tax revenue is expected to be State Bank’s profits. They expect it will be more than last year’s number mainly due to higher interest rates during July – March 2021/2022.
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PM Shehbaz assures favorable measures on CNIC requirement
KARACHI: Prime Minister Shehbaz Sharif has assured business community of taking favorable measures related to CNIC requirement will be taken in the budget 2022-2023.
A high-level delegation of the Karachi Chamber of Commerce and Industry (KCCI) led by Chairman Businessmen Group (BMG) Zubair Motiwala held meetings with Prime Minister Shehbaz Sharif and Federal Minister for Finance and Revenue Miftah Ismail in Islamabad to discuss the overall economic challenges, budgetary measures for fiscal year 2022-2023, taxation policies and the problems being suffered by the business and industrial community of the country.
READ MORE: New tax measures likely in budget 2022-2023
The delegation, which also comprised of Vice Chairman BMG Jawed Bilwani, President KCCI Muhammad Idrees, Former Senior Vice President Saqib Goodluck, Former Vice President Shahid Ismail, President Site Association of Industry Abdul Rasheed, President North Karachi Association of Trade and Industry Faisal Moiz Khan and President Site Superhighway Association of Trade and Industry Aamir Hassan Lari, highlighted the following major points:
KCCI delegation requested the Prime Minister that 17.5 percent Sales Tax on Solar Panels must be withdrawn at the earliest as committed by the Prime Minister at a meeting held at CM House Sindh during his last visit to Karachi. The Prime Minister and Finance Minister assured that it will be withdrawn next week.
READ MORE: Pakistan Budget 2022-2023 – estimates
Matter of Indenting Commission also came under discussion with a humble request by KCCI delegation that indenting commission may please be declared as export proceeds.
Moreover, it was further brought into the limelight that the local manufacturers have the capacity of producing Fiber Optic Cables therefore, the government must take measures to stop the imports of fiber optic cables so that the local manufacturers could be encouraged to enhance their production capacity which would certainly help in saving substantial foreign reserves being wasted on the imports of fiber optic cables.
KCCI delegation also advised Prime Minister and Finance Minister to issues directives for withdrawal of Sales Tax imposed on LED bulbs and its parts so that energy conservation could be promoted all over the country which was badly needed as the countrymen were currently going through prolonged load shedding for many hours every day due to severe energy crises.
READ MORE: Compliance cost much higher for corporatization: PSX
KCCI delegation also expressed deep concerns over delays in release of Drawback of Local Taxes and Levies (DLTL) claims of the exporters which have remained stuck up since long. In response, the Prime Minister promised to disburse the same in the days to come.
KCCI delegation also sought Prime Minister’s assistance in dealing with the unjust imposition of 17 percent Sales Tax imposed on cattle feed made from the agricultural waste. As it is purely agricultural waste used as animal feed for livestock farming and milking, hence sales tax imposed must be withdrawn in the Federal Budget 2022-23. Prime Minister and Finance Minister, while agreeing to KCCI’s viewpoint, assured that ST imposed on cattle feed will also be withdrawn.
KCCI delegation also advocated that the commercial importers of polyester yarn may please be allowed to declare their payment of sales tax and other taxes under Final Tax Regime (FTR) which was also agreed with an assurance that the commercial importers will be treated under FTR.
READ MORE: FBR suggested reduction in tax rates for equity funds
IT related issues along with its potential and an ambitious export target of US$15 billion in three years for IT sector given by Prime Minister was also discussed in detail and it was assured that all the issues being faced by businessmen associated with IT sector will be resolved to promote this sector. In addition to resolving issues, the government would create such an environment wherein Pakistani IT companies abroad could be encouraged to comfortably open up their offices in Pakistan. Gas Tariff for the export sector was also discussed in detail.
READ MORE: PSX proposes tax exemption on property transactions
KCCI delegation, while thanking the Prime Minister Shehbaz Sharif and Finance Minister Miftah Ismail, for taking keen interest in resolving the issues being suffered by the business community, hoped that the Karachi Chamber’s recommendations which have been submitted in the larger interest of the country, will be taken into consideration and incorporated in the forthcoming budget so that the overall business climate could be improved that would certainly lead to promoting industrialization all over the country and generate employment opportunities.
KCCI delegation also extended full support and cooperation to the Prime Minister and his teams for all his future endeavors being undertaken to pull the economy out of crises.
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No increase in petroleum prices: Miftah
ISLAMABAD: Finance Minister Miftah Ismail on Tuesday strongly rejected the reports attributing him regarding increase in petroleum prices in Pakistan.
“In the pre-budget seminar I never even spoke about petroleum prices. Channels running these tickers are doing a disservice to their viewers. There will be no increase in prices today (June 7, 2022) and there is no summary or plan to raise prices,” Ismail said in a Tweet.
Earlier, at the pre-budget seminar, the finance minister said that the government was determined to present a progressive budget, with special focus on fiscal consolidation to bring down the budget deficit below 5 percent of the Gross Domestic Product (GDP).
Addressing a day-long Pre-Budget Business Conference, the minister said an effective strategy had been evolved to achieve the GDP growth up to 6 percent and control inflation with strategic measures.
The conference was convened to provide a platform to agriculturists, information technology (IT) experts and businessmen to share and exchange their proposals with the government on IT, agriculture, business, textile and exports.
READ MORE: Petroleum prices in Pakistan from June 01, 2022
Miftah said the incumbent government had to take difficult decisions to put the economy on track, and it could take more drastic measures if required to improve it.
He said the Pakistan Muslim League-Nawaz (PML-N) came into power in a difficult situation, and it would leave it in a much better condition on the completion of its government tenure.
“You are all with us, we will leave it in a better position,” he said while addressing the audience.
The minister said the current government had re-engaged Saudia Arabia, China, the United Arab Emirates and other friendly countries, and it would hopefully help improve the situation in the country.
READ MORE: Compliance cost much higher for corporatization: PSX
He said Prime Minister Shehbaz Sharif had realized the situation being faced by the downtrodden segments of the society and accordingly directed the quarters concerned to make plans for providing maximum relief to them before hiking petrol prices.
He said the government would provide stipend to around 14 million people, approximately one third of the country’s population.
Miftah expressed pleasure over the presence of stakeholders in the consultative gathering to take collective decisions at the critical juncture and lead the country towards a better future.
He assured the participants that the government would take all sectors along.
READ MORE: FBR suggested reduction in tax rates for equity funds
The minister said the government had inherited the economy in a bad situation, as the country witnessed the third highest inflation rate after Argentina and Turkey.
He said during the four years of Pakistan Tehreek-e-Insaf government, some 20 million people went below the poverty line and 0.6 million lost their jobs.
Every year, he said, around two million people joined the labour market and the country needed around 6 percent economic growth rate to absorb them. However, negative growth during the PTI regime led to unemployment and increase in poverty.
When the incumbent government took over, he said, around Rs 5,600 billion deficit was projected, and it was making concerted efforts to bring it down to Rs 5,200 billion.
The minister said there was average deficit of Rs 1,650 billion per annum during the PML-N’s last tenure, and it rose to Rs 5,600 billion in just three and a half years of the PTI government. The deficit had risen from 6.5 percent to 9.1 percent of the GDP in the PTI regime, he added.
He said average debt taken by the PTI government stood at Rs 5,177 billion whereas the PML-N government had taken Rs 2,132 billion, which was utilized for building power plants and other infrastructure.
READ MORE: New petroleum prices in Pakistan from June 03, 2022
The total debt taken by 19 prime ministers during the last 70 years was Rs 24,952 billion, whereas the PTI government took around Rs 20,000 billion, which was around 80 percent of the total debt.
The minister said around Rs 1,072 billion power subsidy was given during the current year whereas the circular debt went up to Rs 500 billion, taking the total power sector losses to Rs 1,600 billion.
He said the petroleum sector was also given Rs 81 billion subsidy while it had a circular debt of around 400 billion. Likewise, the Sui Northern Gas Pipelines Ltd was facing losses of Rs 200 billion and the Pakistan State Oil of Rs 500 billion.
He said the country needed about $41 billion for debt payment of $ 21 billion over the next 12 months and building foreign exchange reserves up to $18 billion.
He said the government re-engaged the International Monetary Fund (IMF) and expressed the hope that the agreement would be signed soon.
Miftah said the government had to enhance the petrol prices under compulsion, as otherwise, it would have to incur a loss of Rs 120 billion per month – three times more than its expenditures.
He lamented that the country had become an importer of sugar and wheat, contrary to the fact that two commodities were exported during the last PML-N government.
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Compliance cost much higher for corporatization: PSX
KARACHI: Pakistan Stock Exchange (PSX) has said that tax rates for compliance by corporate entities is much higher than the persons out of the tax net.
The PSX in its proposals for budget 2022/2023 submitted to Federal Board of Revenue (FBR), said corporate business profits are taxed twice. Once at company level at 29 per cent and on dividend distribution at 15 per cent.
READ MORE: FBR suggested reduction in tax rates for equity funds
As compare to 44 per cent of total tax in case of companies, unincorporated businesses are being taxed from 0 per cent to 35 per cent in slabs.
This inequality in taxation is discouraging corporatization and documentation as unincorporated businesses are subject to substantially lower taxes.
Absence of clarity in tax laws is causing issues of taxation of Limited Liability Partnership (LLPs) as companies whereas LLPs are essentially AoPs with perpetual life.
Removal of exemption on inter-corporate dividend under section 59B of the Income Tax Ordinance, 2001 is unfavorable to potential corporate groups discouraging compliance with the best practices of corporate governance requirements.
READ MORE: PSX proposes tax exemption on property transactions
The PSX said that inequality of taxation of business shall gradually be removed by reducing corporate tax rate/increasing tax rates for AoPs [First Schedule Part 1, Division I, II, IIA & III].
Restoration of exemption on inter-corporate dividend between companies eligible for group taxation under section 59B of the Income Tax Ordinance, 2001.
Giving rationale to the proposal, the PSX said that equality of tax regime will promote corporatization culture leading towards documentation and will therefore generate more tax revenue.
Adding clarity with respect to status of LLP will encourage more business particularly in services sector to opt for this perpetual business structure. It will also help in increasing tax revenue from these segments.
READ MORE: SMEs should be given tax credit to encourage listing
Definition of AoP in section 80(2) of Income Tax Ordinance, 2001 be amended to include LLP till the time same tax rates are not applied to all forms of business.
Part I, Second Schedule, clause 103C reinstated as follows:
“Dividend income derived by a company, if the recipient of the dividend, for the tax year is eligible for group relief under section 59B.”
READ MORE: FBR urged to eliminate minimum tax for listed companies
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FBR suggested reduction in tax rates for equity funds
KARACHI: The Federal Board of Revenue (FBR) has been suggested to reduce income tax rates for private equity funds in the upcoming budget 2022/2023.
Pakistan Stock Exchange (PSX) in its proposals for budget 2022/2023, stated that Revamped regulations in 2015 introduced different types of Private Funds by replacing Private Equity and Venture Capital (PE&VC) Regulations.
READ MORE: PSX proposes tax exemption on property transactions
Currently, pass-through status under the Income Tax Ordinance 2001 is available to only PE&VCs category. Moreover, current sunset clause up to June 2024 for PE&VC is detracting long-term investors from participating.
A private fund (alternate fund) investing in listed securities attract Capital Gain Tax (CGT) at the rates that applies to unlisted securities (redemption of units of alternate funds will attract treatment of unlisted security under CGT regime, which is significantly higher for corporate investors).
READ MORE: SMEs should be given tax credit to encourage listing
The PSX suggested to insert proper definition of Private Fund referring to 2015 regulations. It also suggested to reinstate exemption to PE&VC as provided under clause 101 of part I of Second Schedule; in addition to: inclusion of Private Fund; and no sun-set clause.
The PSX recommended that specific rate of 12.5 per cent CGT be provided in Division VII of 1st Schedule of the Income Tax Ordinance, 2001 as provided for mutual funds, CIS and REITs (if more than 70 per cent invested in listed equity securities and/or debt securities).
READ MORE: FBR urged to eliminate minimum tax for listed companies
The stock exchange also sought exemption provided in sub-clause (xii) of clause 11A and clause 47B of Part IV of the second schedule to include Private Fund.
Giving rationale to the proposals, the PSX said that this sector can be developed with rational taxation. So far only 4 registered PE&VC funds will be unable to meet funding needs of SMEs/startups & to attract foreign investors. Revenue impact will be neutral to positive as only CIVs will be exempted but the investors will still be obliged to pay tax. The amendment will exempt private funds from applicability of withholding tax as it is a pass through entity.
READ MORE: PSX proposes rationalizing tax rates for listed companies
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PSX proposes tax exemption on property transactions
KARACHI: Pakistan Stock Exchange (PSX) has proposed tax exemption on transactions of immovable properties to Real Estate Investment Trusts (REITs) in order to promote documentation.
The PSX in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), said REITS are an ideal instrument to document and help develop the real estate sector, a priority for the government.
READ MORE: SMEs should be given tax credit to encourage listing
They also allow smaller investors to gain exposure to the real estate sector, an important step to reduce wealth inequality in Pakistan.
The PSX proposed exemption from advance tax on property transfer to/from a REIT Scheme u/s 236C and 236K of Income Tax Ordinance, 2001. It also suggested to remove sunset clause i.e. June 2023 for all categories of REIT. Besides, it is also suggested to reduce minimum tax rate applicable to REIT Management Companies (RMCs) u/s 153 in line with Asset Management Companies i.e. 3 per cent.
READ MORE: FBR urged to eliminate minimum tax for listed companies
The PSX said that it will promote documented real-estate will attract more investments particularly by companies with disclosure of actual prices and income. Revenue impact will be positive as it will generate indirect and additional revenues from allied businesses.
Appropriate amendment to be made in the Income Tax Ordinance, 2001.
READ MORE: PSX proposes rationalizing tax rates for listed companies
For proposal relating to sun-set clause, remove “June 30, 2023” from clause 99A of Part I of Second Schedule of the Income Tax Ordinance, 2001.
For proposal relating to Minimum Tax on RMCs, Clause (2)(i) of Division III of Part III of First Schedule of the Income Tax Ordinance, 2001 shall include “service rendered by RMCs.”
READ MORE: PSX suggests grandfather tax provisions for listed companies
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SMEs should be given tax credit to encourage listing
KARACHI: Pakistan Stock Exchange (PSX) has urged the tax authorities to allow tax credit to Small and Medium Enterprises (SMEs) to encourage listed on the stock exchange.
The PSX in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), said SMEs contribute immensely to Pakistan’s employment, export and GDP growth, and provide 80 per cent of all employment in the country.
READ MORE: FBR urged to eliminate minimum tax for listed companies
A well-functioning SME segment at the Stock Exchange offers a range of benefits including greater access to growth capital for innovative SMEs, documentation, good governance, new jobs through entrepreneurship, more investment opportunity for domestic investors and local venture capitalists.
PSX has launched an SME board to attract smaller companies to get listed on the exchange. The aim is to facilitate SMEs with an alternative to bank financing for their expansion growth and projects.
READ MORE: PSX proposes rationalizing tax rates for listed companies
In order to encourage small and medium enterprises to get listed on the SME Board, it is proposed that the rate of tax for such listed SME companies be permanently lowered by giving tax credit of 50 per cent of tax payable for 3 to 4 years of listings and then onwards 20 per cent of the tax payable.
The PSX said that the share of the manufacturing sector in the job market is only 14 per cent. This is very low because 80 per cent of the manufacturing investments in large scale industries provide less than 20 per cent of the manufacturing jobs. Over 80 per cent jobs are provided by SMEs.
READ MORE: PSX suggests grandfather tax provisions for listed companies
There are significant fiscal tax credit benefits in Spain, Kenya, Brazil, Argentina and other parts of the world for SMEs.
The PSX proposed: In clause (iii), Division II, Part I of the First Schedule to the Income Tax Ordinance, 2001 after a colon the following proviso shall be added, namely:
READ MORE: PSX proposes launch of saving, investment accounts
“Provided that where a tax payer is a small or medium sized company as defined under the Third Schedule of the Companies Act, 2017 and is also listed on the registered Stock Exchange in Pakistan, the tax credit @ 50% of the tax payable on the taxable income of such company, other than a banking company, shall be allowed for the tax year 2021 and onwards.”