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Tag: budget proposals

  • FTO proposes simplification of income tax return forms

    FTO proposes simplification of income tax return forms

    ISLAMABAD: Federal Tax Ombudsman (FTO) has advised the Federal Board of Revenue (FBR) to simplify income tax return forms in consultation with stakeholders to facilitate the taxpayers.

    In its proposals for the budget 2021/2022, the FTO recommended simplification of returns forms in consultations with small taxpayers along with availability of option of filing the returns in Urdu.

    Similarly, an option to file the returns manually with facility provided by the FBR to upload on line data was also proposed.

    The FBR in response to the FTO stated that simplified Income Tax Returns for salaried, small traders having turnover up to Rs10 million, manufacturing Small & Medium Enterprises (SME’s) having turnover up to Rs50 million have been issued.

    It was recommended that FBR should devise some system so that sunset date of filing return is not extended but late filing may be allowed with certain incremental penalty for delay in filing per month or any part of it.

    The FBR responded that in 2020, last date of December 08 was not extended. According to FBR, Income Tax Return making rules have been issued. Though these are applicable for Tax Year 2022 but FBR is following this for Tax Year 2021 and return forms would be available by 1st July (to be submitted within due date without extension on last date).

    The FTO proposed that FBR may approach the concerned Authorities/Establishment Division, to issue instructions to bind the heads of government departments, autonomous bodies and large scale public sector organizations to get the certificate of filing of returns by their employees falling in the tax net at the end of the last date and to link their promotion/annual increments with mandatory return filing.

    Regarding audit, it was proposed to rationalize its parameters so that more focus should be laid on large entities rather than small taxpayers.

    Moreover audits should also include investigative work to detect the evasion through a study of input/output standards of utility bills and production capacity of machinery etc. Several cases for audit should in line with capacity of FBR to complete the audit in a year.

  • Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    KARACHI: Foreign investors operating in Pakistan have suggested the government to abolish Final Tax Regime (FTR) and make all provisions pertaining to withholding tax as adjustable.

    In its proposals for budget 2021/2022, the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday said it had submitted comprehensive taxation proposals for the Federal Budget 2021-2022 which highlight various measures required  to streamline the complex tax regime, incentivize the legitimate tax payer through Ease of Doing Business measures and ensure filing of tax returns by all income earners. 

    Commenting on the Taxation proposals , Irfan Siddiqui, OICCI President, acknowledged that the government has taken various bold measures in the face of many economic challenges, including those emanating from the Covid 19 impact on the local and international trade and business”.

    Irfan Siddiqui added:  “OICCI members are fully conscious that the continuing spread of Covid-19 poses exceptional challenges to the government and have therefore decided not to seek a number of taxation relief measures which, under normal circumstances, would have been justified to boost FDI and align Pakistan to compete with other regional countries.”

    OICCI has strongly recommended that the Minimum Tax regime should be rationalized with a lower level general tax rate and immediately reduced to 0.2 percent  for certain industries, like oil refining and oil marketing companies, with high turnover and low/government regulated  margins.

    “Moreover, Withholding tax regime (WHT) with over 45 rates is cumbersome and needs to be immediately rationalized to 5 rates for filers. Final Tax regime should be abolished and all withholding taxes should be made adjustable. FBR should ensure that all those persons who have been subjected to withholding taxes should file regular tax returns.”

    OICCI Secretary General , Abdul Aleem , giving further details of the key Taxation proposals from the chamber highlighted the need to introduce one unified Sales Tax rate of 13  percent, as applicable in Sindh, and one common tax return form throughout the country, filing of a single tax return with FBR instead of separate ST returns to the authorities in every province. He also stated Income Tax rebate of 2 percent for Shariah Compliance investment have not been effective and the intent of the regulators will not be realized until these are aligned with SECP Shariah regulations. 

    M. Abdul Aleem also stated that OICCI has recommended for substantial increase in FED on unmanufactured tobacco to arrest massive tax evasion in the tobacco industry. This together with introduction of Track and Trace Monitoring system will boost FBR revenue significantly. OICCI also proposed introducing stringent controls and penalties for illicit trade across the whole value chain. Pending review and revision of Afghan Transit Trade agreement (ATTA) , there is need to harmonize duty and tax rates to remove incentive for duty evasion. 

    Highlighting the need for Ease of Doing Business and promoting tax culture in the country , OICCI has recommended that the Tax regime should be simplified with massive reduction in the number of tax payments and filing of various forms/returns. Pending tax refunds should be settled withing 45 days and inter-adjustment of income/sales tax refunds be allowed in the law.

    In line with the latest focus in the country on digitization of the economy, FBR and associated tax authorities need to substantially upgrade their use of digital technology, data analytics, including Artificial Intelligence tools to effectively use a strong data base already available in the country from NADRA and other documented sources  so as to ensure that all income earners regularly comply with the tax requirements. 

    In conclusion, Abdul Aleem observed that OICCI members believe in the potential of Pakistan , despite challenges, which can be harnessed with positive and regular engagement of relevant authorities and private sector.

    There is need to continuously  improve and align policies and practices in Pakistan with the best in the region, to be able to attract sizeable FDI in the  manufacturing , IT and services export  and other job creating sectors.

  • FTO recommends restricting tax officials’ powers

    FTO recommends restricting tax officials’ powers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended restricting powers of tax officials in recovery of outstanding account through freezing bank account of taxpayers.

    The FTO in its proposals for budget 2021/2022 said that coercive recoveries through attachment of bank accounts without notice and subsequent delay in restoring the account, hits the taxpayers very hard.

    It was recommended that notices should be issued with bar code and time limit may be prescribed for ensuring the de-sealing of bank accounts of taxpayers/assesses after resolution of issue.

    Following measures were also suggested as budget proposals:

    • Restrict the use of power to attach bank accounts unless the case under litigation has been established at least in the first appellate stage;

    • Adherence to service of Bar-Coded notices to eliminate possibility of abrupt attachment of bank accounts for recoveries and hasty ex-parte decisions;

    • Shortest time limit may be prescribed in the statute to ensure de-sealing of bank accounts of taxpayers/assesses.

    According to FBR, it is mandatory not to issue Income

    Tax related notice without Bar Code. The mechanism of automatic stay of demand by paying 10 percent of demand also exists under all IR laws.

    However, FTO constantly receives complaints on coercive recoveries and issues appropriate Recommendations.

  • FBR urged to remove CNIC condition on sales up to Rs100,000 by distributors

    FBR urged to remove CNIC condition on sales up to Rs100,000 by distributors

    KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw condition of CNIC on supplies made by distributors to unregistered persons on sales up to Rs100,000.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 stated that under section 23(1)(b) of the Sales Tax Act, 1990 exclusion has been provided to retailers, whereby retailers supplying taxable goods to unregistered persons are not required to mention the CNIC unregistered customers, wherein the transaction value inclusive of sales tax does not exceed Rs.100,000.

    Due to the present provisions of the law, the distributors are facing a dilemma whereby small retailers are purchasing taxable goods valuing Rs.100,000 from mega stores (retailers) in order to avoid the requirement of providing the CNIC, resulting in loss of business for the Distributors who normally used to sell goods to such small retailers

    The KCCI proposed that FBR should extend similar exclusion of Rs.100,000 to distributors as well.

    Giving rationale, the KCCI said that it will help ease of doing business thereby resulting in enhancement of tax revenue.

  • FMCGs should be excluded from tax collecting agent

    FMCGs should be excluded from tax collecting agent

    KARACHI: Federal Board of Revenue (FBR) has been urged to amend laws to exclude manufacturers of fast moving consumer goods (FMCGs) from application of withholding tax under Section 236G and 236H on Income Tax Ordinance, 2001.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022, stated that manufacturers of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam etc., collect advance tax at 0.1 percent for persons appearing on Active Taxpayers List (ATL) and 0.2 percent for non-ATL and 0.5 percent for ATL and 1 percent for non-ATL of gross of amount of sale to distributors, dealers, wholesalers and retailers.

    Most of the goods mentioned above are not fast moving consumer goods. The only FMCG is beverages on which the section 236 G & H are unjustly applied.

    This tantamount to discrimination for beverage manufacturers being the only manufacturer of FMCGs manufacturer class liable to above tax.

    It is not practically possible for manufacturer of FMCGs to collect income tax from dealers, distributors, wholesalers and retailers and it adds to the cost of consumer products.

    The KCCI proposed that the section may be appropriately amended to exclude the manufacturers of FMCGs from being collecting agents under section –236 G & H of the Ordinance.

    The chamber said that it would relieve the unjust burden of tax on consumer goods and enable manufacturers of FMCGs to pass the benefit to end-consumers.

  • FBR suggested to abolish multiple audit provisions

    FBR suggested to abolish multiple audit provisions

    KARACHI: The Federal Board of Revenue (FBR) has been suggested to abolish multiple provisions of audit under Income Tax Ordinance, 2001 and simplify procedure for ease of doing business.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 said that presently audit proceedings can be started u/s 177 as well as through balloting u/s 214C and like-wise enquiries can also be made by the Commissioner u/s 122(5A). There is a concept of a special audit panel u/s 177(11) as well.

    Sub-Section 7 is ambiguous and provides the Commissioner and his sub ordinates with a tool to harass, extort and victimize any taxpayer at will.

    The Commissioner can re-open the Audit of any person or firm at will on unsubstantiated grounds. SEC.177 SUB-SECTION 4: Any person employed by a firm to conduct audit function may be authorized by the Commissioner to exercise powers under sections 175 and section 176.

    The KCCI said that revenue collection through such recovery proceedings is hardly Rs.92.0 Billion whereas the costs due to litigation, involvement of entire tax collection machinery and declining number of tax filers, is far more than the collection.

    Multiple audits under various provisions have eroded the trust of tax-payers in the FBR. RTOs and LTUs. Audit functions under various Provisions have created confusion and complexity in Tax regime.

    Such provisions are also prone to misuse and a source of harassment.

    The chamber proposed that all audit functions should be brought under one provision of Income Tax Ordinance rather than various over-lapping provisions with clear and well defined parameters. Audit Parameters should be transparent and open to taxpayers.

    Further, Sub-Section 7 may be deleted.

    Powers of the Commissioner and sub-ordinate officials should be curtailed to restore the trust of Tax Payers and encourage broadening of tax-base.

    Such Audits should be restricted to specific queries or objections and call for relevant document only rather than opening and re-opening a comprehensive audit every time.

    Giving rationale the KCCI said that bring transparency and clarity to audit functions and rules governing the same.

    Prevent harassment to tax payers and abuse of powers by Inland Revenue officials. This will also help in broaden tax base by restoring confidence in the system.

  • Commercial, industrial utility connections must be brought into tax net

    Commercial, industrial utility connections must be brought into tax net

    KARACHI: Federal Board of Revenue (FBR) has been urged to bring all persons having industrial and electricity utility connections into tax net to ease tax burden on existing taxpayers.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2021 said that currently the taxpayers and filers of income tax returns, particularly industrial entities are overburdened with multiplicity of taxes.

    Overburden of taxes on already registered taxpayers is depriving them of level playing field and business viability against non-taxpayers.

    The chamber proposed that all the entities engaged in business having commercial and industrial utility connections but are out of tax base should be brought to tax-net making them taxpayers and filers.

    According to NEPRA Industry Report 2019 and FBR Tax Directory Data 2018, the number of commercial and industrial consumers is higher as compared to registered Tax Payers with a huge difference, who must be brought into tax-net as they are commercial and industrial entities but out of tax-net.

    The chamber said that it would ease down the burden of taxes over registered taxpayers and shall also broaden the tax base resulting to further documentation of economy.

  • Tax recovery through bank accounts should only from unregistered persons

    Tax recovery through bank accounts should only from unregistered persons

    KARACHI: Federal Board of Revenue (FBR) has been urged to restrict its powers of tax recovery from bank accounts on unregistered persons.

    In its proposals for budget 2021/2022, Karachi Chamber of Commerce and Industry (KCCI) pointed out Section 140 of Income Tax Ordinance, 2001 that is related to recovery of tax from persons holding money on behalf of a taxpayer.

    According to the law for the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –

    (a) owing or who may owe money to the taxpayer; or

    (b) holding or who may hold money for, or on account of the taxpayer;

    The chamber said that this provision and further access to information on bank accounts under other provisions of law, have been counter-productive and led to a flourishing cash economy. Many innovative ways have been evolved by businesses similar to block-chain and a local hundi system. Such provisions only affect the documented businesses while the entire undocumented sector is immune from such laws.

    The KCCI said that access to bank accounts may only be limited to accounts of unregistered persons with unusually high amounts of transactions.

    Commissioner should only be authorized to obtain information about the funds in accounts and to seek clarification as to the nature of transactions and sources of funds. Such persons may be brought into the tax-net.

    The chamber said that it will:

    1. Relief to the registered persons and restore confidence in banking system. Encourage official transactions.

    2. Bring unregistered persons into the tax-regime.

    3. Stimulate economic activities and growth. Increase bank deposits which may be used for lending to industry.

  • FBR suggested to stop intelligence, investigation raids

    FBR suggested to stop intelligence, investigation raids

    The Karachi Chamber of Commerce and Industry (KCCI) has called upon the Federal Board of Revenue (FBR) to reevaluate its approach to tax enforcement, urging a halt to the aggressive raids conducted by the Directorate of Intelligence and Investigation.

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  • FBR proposed to restore sales tax zero rating

    FBR proposed to restore sales tax zero rating

    KARACHI: Federal Board of Revenue (FBR) has been proposed to restore zero-rating of sales tax with objective of ‘no payment no refund’.

    The FBR received proposals for the upcoming budget 2021/2022 from Karachi Chamber of Commerce and Industry (KCCI).

    It is highlighted that in the budget 2019-2020, the Federal Government rescinded SRO1125 and imposed 17 percent Sales Tax on erstwhile Five Zero-Rated Export Sectors and exporters are required to apply for refund after export of consignment.

    It is observed that the exporters who have filed their refund claims to date have received 35 percent of claims payment only while 65 percent of the refund claims are stuck up with the Government which is approximately 12 percent amount of exporter’s running capital.

    However, the profit margin of exporters is around 5 percent to 8 percent. Moreover, exporter can apply for refund only after export of consignment.

    In this manner their liquidity is stuck. Likewise, the exporters make purchases for production of export products at least six months in advance which is consumed based on export orders causing financial hardships.

    The KCCI proposed that it is imperative to revive SRO 1125 in its true spirit and reintroduce system of No Payment and No Refund of Sales Tax for the Five Export Oriented Sectors.

    Although the Government has streamlined the FASTER system, nonetheless, the exporters are facing liquidity crunch amid condition of filing claims only after dispatch of shipment which takes at least three months time. Consequently, the liquidity is held-up causing financial pressure on exporters.

    The chamber explained the benefits of reviving zero rating that the government must consider to restore and revive Zero-Rating under SRO1125 in real spirit or consider reduction in rate of Sales Tax from current 17 percent to 5 percent to facilitate the exports ensuring availability of required/ adequate liquidity and smooth Cash flow, to boost the confidence of Exporters to enhance their exports and cement their business ties with the foreign counterparts to capture true business potential.