Tax practitioners have called for a significant reform in the income tax audit process, urging that the Federal Board of Revenue (FBR) alone should have the authority to select income tax returns for audit, withdrawing this power from the commissioners.
(more…)Tag: budget proposals
-
Online verification of tax withheld should be available
KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) to ensure verification of tax withheld on the IRIS portal in order to facilitate taxpayers in making adjustment or claiming refunds.
Pakistan Tax Bar Association (PTBA) submitted proposals for budget 2020/2021 saying that withholding tax regime should be simplified by reducing the categories of withholding taxes and the rates thereon.
It said that the withholding agent should be facilitated through robust IRIS; wherein the visibility of tax deduction should be provided to the taxpayer instead of relying on the withholding agents’ certificates.
The rates of tax for all withholding taxes under one provision of law should be minimized and the differentiation should be on the basis of Active and Non-Active Taxpayer only.
Withholding agents should be given incentive in the form of tax credit for facilitating the Government withholding/collecting taxes and in identifying potential tax evaders.
The withholding tax challans should be made available on the IRIS to every registered person, instead of collecting the same from registered person(s) deducting and depositing the tax.
The concept of Minimum Tax should be done away with for all the corporate Sector companies, who file their tax returns and pay tax on actual income regular basis.
The government departments including defence should pay the tax withheld on FBR IRIS instead of book adjustment.
Sales tax (including provincial sales tax on services) and other government levies should be excluded for the purpose of withholding collection of tax.
A ‘Small Company’ including company having similar business and turnover should be brought at par with an Individual or AOP having turnover limit up to Rs 50 million.
-
CNIC should be made mandatory for purchase of moveable, immovable properties
KARACHI: Federal Board of Revenue (FBR) has been proposed to make computerized national identity card (CNIC) mandatory for purchase of movable and immovable properties for bringing potential taxpayers into the tax net.
A presentation made on behalf of Pakistan Tax Bar Association (PTBA) for submission of proposals for budget 2020/2021, it is highlighted that Pakistan has a lower tax-to-GDP ratio as compared to regional and other countries, which is causing serious disparity between various sectors of the Economy.
All the segments of the society are not contributing their due share of tax on their income in accordance with their contribution in the GDP.
The number of Active Taxpayers are substantially low, as such broadening of tax base at fast pace is the needed.
For broadening the tax base and to improve the tax to GDP ratio following recommendations are made:-
FBR should extract information from withholding statements, details of government supplies and maintain a database of above third party information. Conduct the data mining and data analysis to generate complete profile for cross verification of data of the existing taxpayers as well as discovery of new taxpayers;
CNIC/NICOP/Passport should be made mandatory for purchase of any moveable or immovable properties, assets and major expenditure;
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.
Exemption under Section 111(4) of the Income Tax Ordinance, 2001 may be allowed only to the foreign remittance brought into Pakistan through proper banking channel for investment for Balancing, Modernization and Replacement (BMR) of existing industrial undertakings or for making fresh investment in industrial undertakings;
Effective enforcement should be ensured for compliance of filing of Return of Income under section 114 of the Ordinance, 2001;
Atleast for five years jurisdiction (other than LTUs, CRTOs) should be made and fixed on territorial basis to avoid slippages of potential taxpayers.
-
PTBA recommends restoring Rs1.2 million threshold for salaried persons
KARACHI: Pakistan Tax Bar Association (PTBA) has recommended to restore basic threshold of Rs1,200,000 for salaried persons in the budget 2020/2021.
According to a presentation of Zeeshan Merchant, advocate high court, given on behalf of the PTBA, urged the government to restore the basic threshold of Rs1.2 million that was available for tax year 2019 and the rates applicable for tax year 2019 for salaried persons, individuals and Association of Person (AOPs).
Alternatively, the tax bar urged the authorities to allow a tax reduction of at least 25 percent of the tax payable to individuals and AOPs, who are subject to tax under Part I of First Schedule to the Income Tax Ordinance, 2001.
The tax bar highlighted that income under the head ‘salary’ is currently taxed on the gross amount. This policy was introduced by bringing down the corresponding rates of tax for each income slab. However, gradually the income slabs as well as rates of tax were enhanced without restoring the deductible allowances when income from salary was taxed at higher rates.
The PTBA proposed that either rationalize the rates of tax or restore the deductible allowances on account of house rent, utilities, conveyance etc. to minimize the tax burden of salaried individuals.
Giving rationale, the PTBA said that it is not justified to tax the salaried individuals (particularly in high income slabs) at such a high rate when other taxpayers are subject to tax on their net profits at much lower rates.
The limit of Rs1,000,000 for loan to employees below benchmark rate provided under Section 13(7) of the ordinance should be increased to Rs3,000,000.
-
FBR urged to allow tax holiday on import of industrial raw material
KARACHI: Federal Board of Revenue (FBR) has been urged to allow tax holiday to import of industrial raw material in order to help the country to fetch much needed foreign exchange through enhanced exports.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, said that Pakistan’s exports are limited to very few sectors.
Payment of cash subsidies and multiple currency depreciation failed to improve exports. As per Fifth Schedule to the Customs Act, 1969 Imports of Textile Machinery and equipment for textile sector is exempted from custom duty and rate of withholding tax is one percent by the textile manufacturing units registered with Ministry of Textiles whereas for other industries Customs Duty is levied at 5.5 percent which is discriminatory and an anomaly.
The exports of non-traditional items have not been promoted due to such discriminatory treatment.
Pakistan could not achieve true export potential which exists in many sectors.
The KCCI proposed that there is a need to go beyond textile and agriculture products.
Export diversification is important. For this all industrial machineries and equipment not locally manufactured may be exempted from Customs Duty, Additional Customs Duty/Sales Taxand Additional Sales Tax.
Withholding Income Tax may be charged at 1 percent, which may be Adjustable/Refundable.
Machineries with latest technology will be imported production will increase for local consumption and for global exports.
Employment and government revenue will increase.
-
Commercial importers demand abolishing CNIC condition, FTR restoration
KARACHI: Commercial importers have demanded the government of abolishing condition of Computerized National Identity Card (CNIC) and restoring Final Tax Regime (FTR) in order to save businesses from adverse impact of COVID-19.
Amin Yousuf Balgamwala, Chairman Pakistan Chemical Dyes and Merchants Association (PCDMA) and former Director of Karachi Stock Exchange has appealed to Prime Minister Imran Khan to restore FTR and SRO 1125 in the upcoming budget 2020/2021 in the best economic interest of the country so that trade and industry can be saved from complete destruction due to ongoing COVID-19 pandemic.
In an appeal to Prime Minister, Balgamwala said that the business of commercial importers has been ruined as a result of corona lockdown and severe economic crisis.
For the prevention of this pandemic all over the world including Pakistan were announced a lockdown to save the lives of masses.
Due to closure of industries and markets, the capital of commercial importers was stuck and now the situation has reached such a stage that commercial importers do not even have the funds to revive the import of raw material.
“If import of raw material would be stopped then it will be very difficult to supply raw material to export-oriented industries accordingly their requirement especially textile sector, which is the backbone of Pakistan economy, as country economy is already suffering from serious crises so if there is a shortage of raw materials, the production activities of the export-oriented industries including textile sector will also be hampered which will have a very negative impact on the country’s exports,” he pointed out.
PCDMA chairman questioned pursuing a pick and choose strategy by the government and said that it is a matter of concern for the business community but the government should understand the delicacy of the current extraordinary situation and provide relief to all sectors of economy.
“Whether it is the export sector or the import sector, the government should provide relief across-the-board without any discrimination so that the businesses and industries affected by the COVID-19 pandemic can get stand up again on their feet,” he opined.
Amin Balgamwala demanded the Prime Minister to abolish the CNIC condition on sale of goods to unregistered persons and said that if immediate relief was not given to commercial importers, they would be forced to close their business. In addition to reinstating SRO 1125, chairman PCDMA also demanded to restore a fixed tax regime (FTR), which is the only way to save trade and industry from collapse.
He also requested to keep petrol pumps open 24 hours a day for uninterrupted supply of raw materials to the industries and appealed to the Prime Minister to allow business 6 days a week also so as to offset the losses caused by the corona lockdown.
-
FBR officials treat taxpayers as criminal using search powers
KARACHI: Business community has resented the use of powers related to search by Inland Revenue officers and treating registered taxpayers as criminal.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 demanded amending such provisions to avoid such misuse of powers.
The KCCI while highlighting provision Section 40 of Sales Tax Act, 1990, said that the officers of Inland Revenue at their discretion and opinion may obtain a warrant from the magistrate and conduct searches of the premises of registered persons at any time.
The search made under sub-section (1) shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (V of 1898).
The chamber said that the officials are treating registered persons as criminals.
Powers to enter and search any place gives immense powers to officers of Inland Revenue. Such powers can be misused for harassment and extortion of tax payers.
The law also does not define the “place” which can be search, therefore it may include homes and personal residences of tax payers.
The chamber proposed that the provisions should be amended to prevent misuse.
“No searches should be made without prior notice in writing to the registered person. No searches may be conducted outside the working hours and holidays or immediately prior to holidays.”
The proposed amendment shall alleviate fears of the business persons and it will also encourage new tax-payers and curtail discretionary powers.
-
Proposed powers for reopening past 10 years tax cases rejected
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday said it will oppose any move to grant powers to tax officials regarding opening cases of past 10 years.
(more…) -
FBR recommended to reduce record retention period to three years
KARACHI: Federal Board of Revenue (FBR) has been recommended to reduce the time limit to past three years for retention of sales tax record.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, highlighted the issue of Section 24 of Sales Tax Act, 1990, which required retention of record and document for six years.
The KCCI said that the long time period only allows the officers of Inland Revenue to blackmail and harass the tax payers by issuing demands from closed accounts as far back as 6 years.
The negative impact of such provision is that the revenue officials spend more time in fishing for discrepancies in old records instead of focusing their efforts on broadening of tax base.
The KCCI proposed that the period retention of record and documents be reduced to 3 years, which is an established practice worldwide for all financial transactions.
Regional Tax Offices (RTOs) and officers will have to work more on identifying new tax-payers instead of fishing in old records and create demand.
The period of 6 years is counter-productive for revenue generation and renders the RTOs inefficient.
In this era of computerization where all the transactions of the registered persons are cross verified instantaneously by the FBR, and the audits are conducted without any delay, the period of maintenance of records and documents should be reduced from 6 to 3 years.
-
FBR advised tracing unregistered persons instead collecting further tax
KARACHI: Federal Board of Revenue (FBR) has been urged to trace unregistered persons instead collecting three percent further sales tax on local supplies.
(more…)