The Federal Board of Revenue (FBR) has extended an invitation to stakeholders, including businesses, experts, and the general public, to contribute their insights and proposals for income tax improvements in preparation for the budget of 2022/2023.
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MoC invites tariff proposals for budget 2022/2023
The Ministry of Commerce (MoC) has opened the floor for budget proposals for the fiscal year 2022/2023, specifically focusing on potential changes in customs tariff rates.
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FBR invites customs proposals for budget 2022/2023
The Federal Board of Revenue (FBR) has initiated the process for the upcoming fiscal year’s budget by inviting customs-related proposals for the financial year 2022/2023 from various stakeholders, including business chambers and associations.
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SRB invites proposals for Budget 2022-2023
KARACHI: Sindh Revenue Board (SRB) has invited proposals for budget 2022/2023 from stakeholders by January 21, 2022.
The SRB said it was in process of formulating budgetary proposals for provincial budget 2022-2023 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 Procedure (Withholding) Rules, 2014, the Sindh Sales Tax Special Procedure (Transport or Carriage of Petroleum Oil through Oil Tankers) Rules, 2018 and 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 service) Rules, 2019 and the various notifications issued under the Act 2011.
READ MORE: Sindh Revenue Board announces tax incentive package
The SRB said that it was policy of the board to consult all chambers, associations, groups, stakeholders and taxpayers before finalizing the budget proposals.
“With this end in view, SRB requests all persons (including the chambers of commerce and industry, business councils, trade associations, tax bars, Institution of Chartered Accountants, Institute of Cost and Management Accountants, taxpayers, etc.) to send their written proposals latest by Friday, January 21, 2022.
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SECP proposes exemption of additional CGT on foreign investors
ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has recommended exemption of additional capital gain tax (CGT) on disposal of shares in case of foreign investors, who are not on the Active Taxpayers List (ATL).
The SECP submitted tax proposals for budget 2021/2022 to the Federal Board of Revenue (FBR).
The SECP submitted following proposal in case of CGT:
Exempt foreign investors from applicability of 100 percent additional tax in case their name is not appearing in Active Taxpayers List (ATL) in the Tenth Schedule
Core objectives
Presently, 44 percent of total foreigners investing through PSX are currently not appearing in ATL list as a result of which they are subject to Capital Gain Tax (CGT) @ 30 percent.
For such investors who do not have any other source of income in Pakistan except capital gains, should not be subject to additional 100 percent tax for not being in the ATL
Align it simplified tax regime for Roshan Digital Account (RDA) holders, wherein tax rate applicable for persons appearing on ATL will be charged to RDA holders
Foreigners may be subject to taxation in their home country being resident tax payer therefore, a balanced taxation of their income in Pakistan is essential
Benefit to Economy
The rationale taxation of foreigner’s income from investment will result in inflow of foreign exchange, boosting foreign exchange reserves of the country.
Broaden investor base of capital markets and more liquidity to capital markets by luring foreign investors.
Impact on Tax Revenue
Foreigners represents approximately 5 percent of overall capital market investors trading and removing additional tax will not materially impact tax revenue.
Fresh investments will result in further tax revenue, in case tax incentives are provided.
Comparable regional practices relating to taxability
A brief overview of CGT practices adopted in other regions is provided below:
Country Rate of CGT Bangladesh 15 percent India 10 percent – Long term 15 percent – Short term Malaysia Nil Kyrgyzstan CGT are subject to ordinary income tax rate at 10 percent Nigeria 10 percent Mauritius Corporate: 15 percent if holding period is less than 6 months Individual: 10 percent if income is less than MUR 650,000 & 15 percent if income is more than MUR 650,000 Oman Nil UAE Nil Singapore Nil -
Value added textile exporters demand 50 percent reduction in withholding tax
KARACHI: The association of value added textile exporters on Wednesday demanded to reduce the withholding income tax by 50 percent in order to reduce burden on manufacturers and improve country’s foreign exchange earnings.
In a joint press conference, the exporters demanded the government of restoring Zero Rating – No Payment No Refund System, continuation of Duty Drawback of Taxes (DDT) & Technology Up-gradation Fund (TUF) scheme, reduce WHT rate to 0.5 percent, suspension of Export Development Fund (EDF) surcharge, reduce and fix tariffs of electricity, indigenous gas & RLNG, continuation of duty free import of cotton yarn in the forthcoming Federal Budget 2021-2022.
Zubair Motiwala, Chairman, Council of All Pakistan Textile Mills Associations; Jawed Bilwani, Chairman, Pakistan Apparel Forum; Tariq Munir, Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Rafiq Godil, Chairman, Pakistan Knitwear and Sweater Exporters Association; Feroze Alam Lari, Chairman, Towel Manufacturers Association of Pakistan; Abdus Samad, Chairman, Pakistan Cloth Merchants Association, Zulfiqar Ch., Chairman, All Pakistan Textile Processing Mills Association; Shaikh Shafiq, Former Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association; Khawaja M. Usman, Former Chairman, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, Amin Allana, Chairman, All Pakistan Bedsheets & Upholstery Manufacturers Association, Yusuf Yaqoob, Chairman, Pakistan Weaving Manufacturers Association participated in the Joint Press Conference held at PHMA today.
The Chairmen of the Value Added Textile Exports Associations apprised that they have submitted Budget Proposals to the Federal Government wherein the top demand is to restore Zero Rating on GST – “No Payment No Refund Regime” through revival of SRO 1125 in letter & spirit as SME exporters have been closed down and decreased by 30% as compared to last year due to imposition of 17% which blocked exporters precious liquidity. They were of the view that the textile exporters are optimistic and hopeful that the Government in the Federal Budget 2021-22 will seriously consider and accept their demands, proposals and recommendations.
They highlighted that despite COVID19, the textile exports have increased by 17.35% as compared to last year and will InSha-ALLAH reach to US$ 15.50 billion in FY 2020-21 owing to incumbent Government’s pragmatic policies – payments of Drawback of Local Taxes & Levies (DLTL) / Duty Drawback of Taxes (DDT), special / competitive tariff and uninterrupted supply of utilities. They stated that It is on record that due to commencement and payments of DLTL Scheme in 2009, the Textile Exports have increased by 7.3% in 2010 and by 35% in 2011. However, in 2012, textile exports were decreased by 10.66% due to withheld payments of DLTL. Therefore it is most crucial that the Government must continue the DDT scheme for the next five years. They demanded that Duty Drawback of Taxes on Garment, Home Textile & Fabric exports should be provide @ 7%, 6% & 5% respectively on shipment basis for next five years to compete in the international market as competing countries are extending same around 12% to 16%. With commitment, the rates will be increased every year by 1% which means 7%, 6% & 5% in 2021-22, 8%, 7% & 6% in 2022-23, 9%, 8% & 7% in 2023-24 and so on, respectively. Further, Incremental DDT, on an increase of 10% exports over previous year, should also be provided @ 2%. This will bring huge investments in textile sector and shall encourage new-comer exporters to invest in textile sector.
They said that with the introduction of Technology Up-Gradation Fund (TUF) scheme in 2009, 30% Capacity of Textile Sector has been enhanced. Therefore, it is imperative to reinstate Technology Up-Gradation Fund (TUF) Scheme for next five years. This will bring up-gradation and advancement in technology leading to production enhancement as well as exports. 0.25% Export Development Fund (EDF) Surcharge is deducted from export proceeds of the exporters for export development since 1992. Collection of EDF surcharge is approx. Rs9 billion annually. Presently Govt. has Rs58 billion in its kitty on account of EDF. Hence, they demanded to the Government to suspend collection of Export Development Surcharge till unutilized amount of Rs58 billion of Export Development Fund (EDF) is exhausted. Exporters fall under Final Tax Regime and required to pay 1% WHT of their export proceeds. They demanded that Withholding Tax (WHT) should be reduced from 1% to 0.5% for exporters as this would also help the exporters in using the cash liquidity for enhancement of the exports.
The present Government had announced separate tariff of gas and electricity for export sectors with an assurance that this tariff will last for 3 years. However, tariff of gas and electricity was enhanced after a year. To compete in the internationally and capture more markets, it is crucial that tariff of Electricity, Indigenous Gas and RLNG for exporters should be fixed at 7.5 cents/kwh, Rs819/MMBTU and $6.5/MMBTU respectively for next five years and the same should be applied countrywide.
Owing to historically low cotton production in the country and severe shortage of cotton yarn, on demand of the Value Added Textile Sector, Government has allowed duty free import of Cotton Yarn till 30th June, 2021. We understand that the Government should continue duty free import of cotton yarn until Pakistan’s cotton production reaches to 14 million bales. They recommend that permission for import of Raw Materials and Intermediate Goods for manufacturing of finished goods meant for export under Duty & Tax Remission for Exporters (DTRE) should be automated and allowed to registered Textile Exporters through Ministry of Commerce Textile Industry’s RDA Cell whose licence is renewed after every two years as RDA Cell, Textile Division, Ministry of Commerce has complete details of textile units i.e. production, exports, machinery, exportable items details including HS Codes, Value, Quantity etc. Subsequently, once RDA Cell approves the permission for import of Raw Materials and Intermediate Goods under DTRE and it should be processed on fast track within 48 hours by Customs, accordingly.
It is pertinent to mentioned that Value Added Textile Exports contribute to around 62% in total exports, provides 42% urban employment particularly to female workforce who mostly are widows and orphans, earns highest foreign exchange and supports approx. 40 allied industries. In this manner, the value added textile industry playing pivotal role to strengthen the economy and prosperity of the country. They were of the view that the exports must remain top priority of the Government as it is the lifeline of economy deserves government’s continuous support. If the Government assures to extend the deserving support to the Value Added Textile Export Sector it has the capacity to achieve the milestone and pledges to enhance its exports by 30% and will reach at US $20 billion in FY2021-22 and shall increase by 25% every year onward 2022-2023 resulting to surplus trade of Pakistan, more foreign exchange earnings & additional employment.
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SECP suggests measures to document real estate sector
ISLAMABAD: Securities and Exchange Commission (SECP) has submitted its tax proposals for budget 2021/2022 for documenting real estate sector and promotion of Real Estate Investment Trusts (REITs).
The SECP submitted following suggestions for documenting real estate sector and promotion of REITs:
(i) Reduce tax on dividend from REITs from 25 percent to 15 percent to synchronize it with mutual funds [First schedule, Part-1, Division-III, paragraph B] of Income Tax Ordinance, 2001.
(ii) Exempt advance tax on property transfers to/from a REIT Scheme u/s 236C and 236K of Income Tax Ordinance, 2001.
(iii) Exemption for CGT provided in clause 99A, Part 1, 2nd schedule be applied to all categories of REITs (mix-use projects) without any sun-set clause
(a) Core objective of the proposals:
• To support government vision for development of housing sector and allied industries
• To promote regulated real-estate sector for promoting documentation and transparency
• To introduce level playing field for regulated sectors
• To remove disadvantage/dis-incentive caused to the REIT sector (Presently 1 licensed REITs, 4 REITs in pipeline and 9 RMCs registered)
• To increase overall tax revenue for FBR and provincial revenue authorities
(b) Direct and indirect impact on tax revenue (impact will be positive)
• Direct tax revenue for FBR increases; example – Tax revenue of Dolmen City REIT is highest tax being paid compared to any other Mall bigger or of same size. In addition, corporate tax from RMC;
• Encourages sector to grow thereby, fostering economic activity through allied industries resulting in higher tax collection;
• Transfer of properties to the REIT structure will also induce proportional tax collection of provincial/local revenue departments;
(c) Benefit for national economy
• Promoting economic activity through regulated, documented and transparent models and moving towards formal economy
• Level playing field for different investment avenues (collective pooled investments through REIT Fund)
• Investor participation in real estate sector with protection of interests under the REIT law vis-a-vis, falling prey to unregulated real estate sector mushrooming in the market
• Increase in revenue for the federal and local governments;
• Disclosure and taxation of property transactions at market value instead of DC rates
• Job creation related to construction, real estate and allied industries;
• Broaden the investor base and size of capital markets;
• Due to mandatory listing, small savers can share profits arising from real estate industry (which currently not available) – tax revenue from trading at stock exchange + CGT.
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ACCA suggests imposing income tax on landowners
KARACHI: The Association of Chartered Certified Accountants (ACCA) has suggested the government to impose income tax at 7 percent on landowners to increase the agriculture share in the GDP.
The ACCA in its proposals for budget 2021/2022 stated that agriculture (recently growing at 2.77 percent) has the potential to reach up to 55 percent of the GDP from the current levels of around 24 percent.
“There’s a need for large landowners to be taxed at minimal rates, i.e. 7 percent,” it added. The revenue generated through this should be used to subsidise seeds, fertiliser, water, electricity, fuel, etc. for the small farmers. The use of latest, sustainable farming technology and easy access to cheap or interest-free loans should be ensured.
It urged the government to reduce tax rates to a single digit and ensure broadening of the tax net by adopting Data Analytics and Artificial Intelligence leveraging rich data sources at government’s disposal such as NADRA.
The proposals also talk about the importance of moving away from indirect taxes and calls for rationalisation, standardisation and automation of tax laws & administration to minimise harassment of taxpayers.
The suggested structural reforms include harmonisation of federal and provincial tax laws, issuance of a single tax return, reduction in the discretionary powers of tax authorities, predicating appraisals of FBR functionaries on growth of business sectors under jurisdiction to instil a mindset of using tax as a means for GDP growth, incentivising tax payers to promote a tax culture, and establishing an independent appellate forum at Commissioner Appeals level.
The proposals also hope for the government to have a long-term strategy for import substitution, call for more incentives to local industry and favours heavy duties on non-essential imports and luxury items. Tax benefits to businesses pioneering UN’s SDGs have been recommended.
The negative growth in sectors such as mining and quarrying (-6.49 percent) and electric generation (-22.96 percent) is also highlighted for the government to take immediate action.
Proper legislation and rationalisation can help improve the situation for mining and can also result in attracting FDI. Focus on bringing down line losses, improving energy mix with clear plan for transition to renewables, as well as revising the existing costly agreements, can help reduce the negative trend for the electricity generation.
The document lauds government’s interventions such as Roshan Digital Account and incentives to the construction sector and mega projects such as Ravi Riverfront and calls for their continuation and further enhancements.
The global body has shown concern about the growing unemployment (11.56 percent) among the youth aged 20-24 and urges government to make youth employment one of the focus areas with considerable spending in the budget 2021-2022.
Further innovations in the Kamyab Jawan programme and introduction of new skills development and entrepreneurship support programmes with focus on emerging technologies should be government’s priority.
Significant increase in education budget with new programmes by provinces to support girls’ education, as well as adequate spending towards health and communications infrastructure, has been termed the ‘need of the hour’ by the global body. ‘Facilitation of high broadband penetration is critical for the future-fitness of our education sector and public services delivery,’ said ACCA.
Segmented approach in programmes such as Ehsas to ensure benefits reach the most marginalised segments of community across the country should be adopted for an inclusive growth.
Close collaboration with the IT/ITeS sector is needed, and the sector should be offered with tax rebates to facilitate its expansion. Similar to CPEC, it’s believed that there’s a potential for something like ‘China-Pakistan Technology Zone’ to connect our innovation value chain with economies in the region.
It’s also pointed out that the past outstanding refunds have only been cleared partially. It’s important to strengthen the trust of the taxpayer as well as provide liquidity to businesses, especially at a time when businesses are recovering from the effects of the pandemic.
It’s reiterated that government needs to ensure openness and transparency to foster trust and cultivate a healthy tax culture in the country.
ACCA has also confirmed that it will be holding a number of seminars to discuss its budget proposals engaging country’s top business leaders and policy makers.
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FBR urged to issue FTNs against withholding tax deduction
KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) to issue Fee Tax Numbers (FTNs) to persons who are not liable for withholding tax.
In its proposals for budget 2021/2022, the Karachi Tax Bar Association (KTBA) said that Section 49(3) of the Income Tax Ordinance, 2001 has specified that any payment received by the Federal Government, a Provincial Government or a Local Government shall not be liable to any collection or deduction of advance tax.
No clarification or list of FTN entities to whom this subsection applies, the tax bar said.
In absence of any SRO or underlying Rules causes unease to the withholding agents to determine proper withholding tax treatment in such case.
FBR should issue a separate list of Fee Tax Numbers (FTNs), who are not liable to tax withholding as provided under section 49(3) of the Ordinance through a S.R.O.
The KTBA said that this will assist the withholding agents and save considerable time in deciding whether a respective FTN holder is required to produce exemption certificate or not.
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KTBA proposes amendments to automatic stay in recovery cases
KARACHI: Karachi Tax Bar Association (KTBA) has recommended amendments to provisions of the Income Tax Ordinance, 2001 related to automatic stay in recovery notices.
It is proposals for budget 2021/2022, the KTBA said that Sub-Section (2) of Section 138 if Income Tax Ordinance, 2001 provides that If the amount referred to in the notice issued under sub-section (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover from
— the taxpayer the said amount by one or more of the following modes, namely:
— attachment and sale of any movable or immovable property of the taxpayer;
— appointment of a receiver for the management of the movable or immovable property of the taxpayer.
— arrest of the taxpayer and his detention in prison for a period not exceeding six months arrest of the taxpayer and his detention in prison for a period not exceeding six months
Provision of automatic stays not all exhaustive.
The tax bar said that if a person pays ten percent of the disputed demand under section 140 even then the recovery from taxpayers may be made through the modes envisaged under sub-section (2) of section 138 which is harsh and rendered section 140 redundant and superfluous.
The tax bar proposed that the condition of the payment of ten percent of amount due shall also be made applicable for section 138 to create synchronization between section 138 and 140 of the Ordinance.
The proposed amendment seeks to address the inequity afforded in the law.