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Tag: budget proposals

  • Tax fraud cases should be investigated through special directorate

    Tax fraud cases should be investigated through special directorate

    KARACHI: Tax practitioners have discussed sales tax matters at a pre-budget seminar and recommended that tax fraud cases should be investigation through a special directorate.

    Members of Karachi Tax Bar Associations (KTBA) in the pre-budget seminar discussed various issues pertaining to sales tax laws.

    They highlighted the issue where jurisdiction for audit and adjudication of cases involving tax fraud as well as routine audit and assessments lies with the same officer. Further, the two proceedings require different type of skill set and approach.

    It is also discussed that same officer is responsible for conducting audit and adjudication- KTBA also filed petition in SHC seeking segregation of same which still pending

    Lack of segregation, results in inefficiency and undue harassment of law compliant taxpayer, as officers invariably include allegation of tax fraud in almost every show cause notice, the members discussed.

    They proposed for the budget 2021/2022 that cases of tax fraud should be investigated and adjudicated by a Special Directorate to be set up for this purpose.

    Further, concerned officer exercising jurisdiction over a taxpayer, if has determined that taxpayer is involved in suspicious/criminal activity the case should be turned over to the Special Directorate.

    Function of conducting audit and assessment of tax/adjudication should also be separated

    Detailed framework / rules should be prescribed after consultation with all the stakeholders.

  • Corporate tax rate should be brought down to 25pc

    Corporate tax rate should be brought down to 25pc

    KARACHI – Tax practitioners gathered at a pre-budget seminar organized by the Karachi Tax Bar Association (KTBA) have urged the government to consider reducing the corporate tax rate to 25 percent in the upcoming budget for 2021/2022.

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  • FBR advised to use withholding statements for identifying new taxpayers

    FBR advised to use withholding statements for identifying new taxpayers

    KARACHI: Tax practitioners have advised the Federal Board of Revenue (FBR) to examine withholding statements and extract information of persons not paying taxes and not filing their annual returns.

    The members of Karachi Tax Bar Association (KTBA) in their pre-budget 2021/2022 seminar urged the FBR for mining of its database to identify new taxpayers & those not fully discharging their liabilities

    FBR should extract information from withholding statements, details of government supplies and maintain a database of above third party information, according to a presentation made by Haider Patel, former president, KTBA.

    He further suggested that relevant organizations, departments, institutions including utility companies, banks, NADRA and information obtained related to offshore transactions should submit prescribed information on quarterly basis to the FBR.

    The FBR has been further advised effective enforcement for compliance of filing of Return of Income under section 114 of Income Tax Ordinance, 2001.

  • FBR advised to simplify withholding tax regime on imports

    FBR advised to simplify withholding tax regime on imports

    KARACHI: Federal Board of Revenue (FBR) has been urged to simplify the withholding tax regime on imported goods under Section 148 of the Income Tax Ordinance, 2001.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 urged to FBR to simplify the withholding taxes on goods at the import stage.

    It suggested that the criteria for obtaining exemption under Section 148 of the Income Tax Ordinance, 2001 should be based on discharge of advance tax liability as per section 147 of the Income Tax Ordinance, 2001 and clause 72B of the part 1 of the second schedule should be restored.

    Raw materials imported at the rate of 5.5 percent withholding tax should not be subject to minimum taxation. This anomaly should be clarified by FBR at the earliest.

    Procedure for application of reduced rate of 2 percent on import of raw material for own use which are not covered under Part II of Twelfth Schedule is highly cumbersome and should be simplified.

    Section 148 (1) of the Ordinance to amended via the following insertion:

    “Provided that the Commissioner shall issue exemption certificate/ certificate of non-deduction / collection of advance tax at source at import stage within fifteen days of filing of application to exempt entities upon verification:

    Provided further that the Commissioner shall be deemed to have issued the exemption certificate upon the expiry of fifteen days to the aforesaid company and the certificate shall be automatically processed and issued by Iris”.

  • FBR urged to abolish withholding tax, minimum tax for commercial importers

    FBR urged to abolish withholding tax, minimum tax for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax and minimum tax for commercial importers in the upcoming budget 2021/2022.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for the upcoming budget said that commercial Importers of raw material pay withholding tax at 2 percent up to 5.5 percent which can only be possible if the gross profit is 30 percent, while the margin is not more than 2 to 3 percent on raw materials sold without value addition or change in form.

    By amendment to Section 148 of Income Tax Ordinance, 2001 through Finance Bill 2018-19, WHT paid on import of raw materials by commercial importers has been converted to minimum tax and the importers have been taken out of fixed tax regime (FTR).

    The chamber said that the concept of WHT is unique to Pakistan’s Tax regime which in fact is tantamount to putting the burden of tax-collection from undocumented entities on the compliant tax payers and avoiding the responsibility to broaden tax-base.

    After acquiring unprecedented powers to access information under Section 56 A and 56 B in Income Tax Ordinance, 2001, FBR and its subordinate departments must take the responsibility to identify non-compliant and undocumented entities/persons instead of laying the onus on existing taxpayers.

    The chamber proposed that concept of minimum tax and withholding tax may be abolished.

    Tax Payers may be allowed to pay certain Fixed Tax or opt for Audit regime and pay taxes in accordance with actual tax liability on Income.

    Furthermore, all Taxes deducted have to be adjustable against actual tax liability.

    Giving rationale, the chamber said that the commercial importers who are a major source of revenue will be able to resume their business and contribute to revenue as well as promotion of SMEs.

  • Jurisdiction of big taxpayers given to CTO

    Jurisdiction of big taxpayers given to CTO

    KARACHI: Federal Board of Revenue (FBR) has transferred jurisdiction of big volume taxpayers to Corporate Tax Office (CTO) instead of dedicated tax offices for big taxpayers i.e. Large Taxpayers Office (LTO).

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 pointed out that the FBR had created new LTOs which deal with taxpayers having a turnover of Rs.1 billion or more.

    However, FBR has changed the taxpayer’s jurisdictions abruptly without any intimation.

    Jurisdiction of some tax payers has been transferred from LTO to CTO despite having a turnover of Rs.7 to Rs8 billion which has created a great deal of confusion and hardship. Difficulties in transfer of soft data/hard copies of tax records from one jurisdiction to other has created problem in processing of refunds and other issues.

    The chamber urged the FBR to correctly and transparently implement the said policy.

    Transfer of Jurisdiction should be streamlined and made easier with prior intimation and valid reasoning.

    Taxpayer data will be available for longer period to be checked by himself at one place and it will also facilitate taxpayers.

  • Commissioner Appeals should be empowered to grant stay up to 90 days

    Commissioner Appeals should be empowered to grant stay up to 90 days

    KARACHI: Federal Board of Revenue (FBR) has been urged to authorized commissioner appeals to grant stay up to 90 days instead existing 15 days.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 said that currently Commissioner (Appeals) grants stay for 15 days only and after expiry of the stay the taxpayer has to file repeated extensions until the decision of the Appeals. Relevant Sections are: ITO 2001 Section 128 (1A)

    The chamber said that this is a cumbersome process which is quite unnecessary and causes undue hardship.

    The KCCI proposed that amendment should be made to Section 128 (1A) of the ITO 2001, to increase the stay duration to Ninety (90) days instead of 15, and extend order timeline to 180 days instead of the existing 30 days.

    This will eliminate unnecessary documentation and save time of both the taxpayer and the Commissioner (Appeals).

  • Major reforms in personal income tax likely in budget

    Major reforms in personal income tax likely in budget

    ISLAMABAD: The tax authorities are working on major reforms in personal income tax to be introduced through budget 2021/2022.

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  • FBR urged to revise slabs for advance tax collection on motor cars

    FBR urged to revise slabs for advance tax collection on motor cars

    KARACHI: Federal Board of Revenue (FBR) has been urged to revise slabs of engine capacity of motor cars to give benefit to buyers in payment of withholding tax.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, said that advance tax under section 231B of Income Tax Ordinance, 2001 is collected by manufacturers on following categories:

    On engine capacity 1001cc to 1300cc the advance tax is collected at Rs25,000.

    While on engine capacity 1301 cc to 1600cc the advance tax is collected at Rs50,000.

    OICCI recommended that as locally manufactured sedans passenger cars fall slightly above the 1300cc category the slightly higher engine capacity size results in these vehicles falling in higher tax bracket making it more expensive with higher upfront cost to customers.

    Amendment should be made in the categories of vehicles mentioned in Division VII of Part IV of First Schedule as follows:

    On engine capacity 1001cc to 1350cc the advance tax rate should be Rs25,000.

    While on engine capacity 1351 cc to 1600cc the advance tax rate should be Rs50,000.

    In its proposals for auto sector, the OICCI recommended that minimum tax rate should be reduced to 0.2 percent for authorized dealers of local vehicle manufacturers as they have high turnover and low margins.

    The OICCI further said that exempt imports made under SRO 655(I)/2006 & SRO 656(I)/2006 from ACD levied vide SRO 1178 (I) 2015 and enhanced vide SROs 630 (I)/2018 and 670 (I)/2019.

    Federal Excise Duty (FED) on locally manufactured vehicles should be withdrawn.

    Levy of FED on locally manufactured vehicles be withdrawn by deleting the serial no. 55B of Table I of First Schedule to the Federal Excise Act, 2005 as it has resulted in significant increase of sales price of vehicles with consequential reduction in sales volume of the respective vehicle categories.

  • FBR recommended to reduce minimum tax for chemical companies

    FBR recommended to reduce minimum tax for chemical companies

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce minimum tax rate for chemical companies having large turnover with low profit margins.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, recommended that minimum tax rate should be reduced to 0.2 percent for large chemical companies with large turnover with low profit margins.

    It further recommended that clause b of Section 148(7) of Income Tax Ordinance,  2001 as deleted by the Finance Act, 2017 should be restated, which read as follows: “148(7) b fertilizer by manufacturer of fertilizer” to allow adjustment of tax deducted at import stage for fertilizer imported by a fertilizer manufacturer so as not to make it a final tax.

    It recommended that exemption under Clause 42 read with section 153(3) of the Income Tax Ordinance, 2001 be available to all terminals without discrimination. The said clause be re-worded as follows:

    “(42) The provisions of sub-section 3 of section 153 shall not apply in respect of payments received by a resident person for providing services by way of operation of terminal(s) at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.”

    For the fertilizer industry, the GST on supply of natural gas as feed stock is at 5 percent and as fuel stock is 17 percent. However, the output GST rate on sales of finished goods i.e. urea is 2 percent. This mismatch between input and output GST results in excessive input tax refundable build-up.

    GST rate on supply of natural gas for fertilizer industry should be zero percent.

    For the sales tax rate on raw material of paints, the OICCI made following recommendations:

    i. Sales tax of 25 percent should be imposed on some basic raw materials like Titanium dioxide and other following categories for commercial importers.

    ii. Enforcement measures to be made more effective in consultation with OICCI members, who are established taxpayers, to penalize tax evaders.

    The OICCI highlighted that macro nutrients being imported under Chapter 31 of Pakistan Customs Tariff, enjoy reduced duties and taxes representing only 8 percent of the value imported whilst in case of micronutrients being imported under Chapter 28, the import duties and taxes are quite high representing 29% of import value.

    It recommended to make necessary amendments in the revenue regulation to reduce sales tax and import duties on import of micronutrients.