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Tag: budget proposals

  • PTBA recommends restoring Rs1.2 million threshold for salaried persons

    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

    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

    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

    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

    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.

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  • FBR recommended to reduce record retention period to three years

    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

    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.

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  • Bilingual one-page income tax return form advised

    Bilingual one-page income tax return form advised

    KARACHI: Federal Board of Revenue (FBR) has been advised to make one-page simple income tax return form and that should be available in Urdu and English to facilitate taxpayers.

    In its proposals for budget 2020/2021, the Karachi Chamber of Commerce and Industry (KCCI) said that every year changes are made in income tax form and ironically, it becomes more confusing and difficult for the tax-payers to fill.

    It is particularly cumbersome for the Small and Medium Enterprises (SMEs) including individuals and Association of Persons (AOPs).

    The KCCI said that taxpayers have to seek assistance from consultants and pay large amount of fee only to comply with the requirements of tax return.

    Due to the changes every year, tax-payers have to wait for the new form to be issued by the FBR which takes a month or two after the new budget is approved.

    “The complicated form only helps the business of consultants and tax practitioners at the expense of compliant taxpayers,” the KCCI said.

    It is one of the reasons that many individuals prefer to stay out of tax regime and a deterrent to broadening of tax base.

    The Karachi Chamber proposed that separate income tax return forms for companies, AOPs, individuals and salaried class should be created.

    Forms for SMEs and individuals and retailers should be a simple one page form both in English and Urdu.

    Manual completion and filing should be allowed for individuals and SMEs in order to encourage documentation.

    Extreme penalties and charges should be avoided in case of late filing.

    Errors/short payment should be notified to registered person within two months of filing and correction of errors should be allowed to tax-filer for up to 3 months of filing without requirement of commissioner’s approval.

    The chamber said that incorporation of proposal will help in simplification of filing procedures and documentation. Besides it will also help in broadening of tax base and increase in number of filers.

    Further, it will save unnecessary expenses on fees of consultants and tax practitioners. It will eliminate corruption and harassment.

  • All income tax audit selections should bring under one provision

    All income tax audit selections should bring under one provision

    KARACHI: Federal Board of Revenue (FBR) has been urged to eliminate audit selection under various provisions of Income Tax Ordinance, 2001 for the confidence building of taxpayers.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, 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 reopen the audit of any person or firm at will on unsubstantiated grounds.

    Under sub-Section 4 of Section 177, 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 chamber said that the revenue collection through such recovery proceedings is hardly Rs.92 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 KCCI 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 taxpayers 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.

    The chamber said that it will 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. Broaden tax base by restoring confidence in the system.

  • Garments exporters demand sales tax zero rating revival

    Garments exporters demand sales tax zero rating revival

    LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has demanded the tax authorities to reintroduce zero-rated sales tax regime.

    In its proposals for budget 2020/2021 submitted to Federal Board of Revenue (FBR), the PRGMEA demanded restoration of zero-rated regime of ‘no payment and no refund of sales tax’ for export-oriented sectors including textile at least for one year to sustain the industry amidst the severe liquidity crunch due to COVID-19.

    The government should release all stuck claims of the exporters, including DLTL, DDT, Customs Rebates and Sales Tax rebates, as the liquidity crunch is a major stumbling block in the way of improving exports.

    It said the apparel industry should be allowed to import fabric under the SRO 492 scheme, as the weaving industry of Pakistan is unable to fulfill demand for fashion wear, adding, the government should also announce complete 100 percent drawback rate of incentive at 7 percent without the condition of increment with simple procedure and paperless working for two years (2019-2020 and 2020-2021).

    Ijaz A. Khokhar, chief coordinator PRGMEA, in a statement said they had also suggested the government that incentive amount should be directly credited to the exporter’s account at the time of realisation of export proceeds and State Bank of Pakistan may subsequently claim the amount from the government.

    Moreover, Khokhar said the government should also extend the last date for submission of claims of duty drawback.

    The PRGMEA demanded a one-window operation so that the exporters could focus on the market research and marketing for their products, besides proposing that cotton yarn, the major raw material of apparel sector, should be exempted from all duties and taxes to encourage value-addition.

    One-window operation may effectively be introduced to replace the lengthy procedures that involve interaction of manufacturer with various agencies. At the moment, different government agencies have been harassing the textile industry virtually every day. Social Security, EOBI and all other taxes should be merged and deducted at source. The government exchequer will receive more revenue, if a reasonable percentage of realised amount is deducted. And many of the SMEs companies will add in the tax net automatically.

    The PRGMEA also urged the government that the custom duty of 7 percent on import of Polyester staple fibre including a range of 20 percent anti-dumping duty should be abolished to reduce the cost of production to compete in the market.

    It further said that exporters had received just 35 percent of claims payment only, while 65 percent of the refund claims were stuck with the government, which cumulated 12 percent of the exporters’ running capital; however, the profit margin of exporters was around five to eight percent.

    “Due to availability of liquidity and smooth cash flow, the confidence of exporters will be boosted to enhance their exports and cement their business ties with the foreign counterparts to capture true business potential,” it added. The government has given assurance to clear all pending claims, but the factual position is that more and more refund claims are piling up with the payment of just a small number of claims.

    PRGMEA asked the government should announce a clear policy to finally clear all the pending refund claims.

    The trade association also requested that import of fabric be allowed under SRO 492 instead of DTRE, which was very complicated and only 2 percent exporters could avail importation under DTRE facility, whereas 97 percent SME sector could be facilitated under SRO 492, which was enforced previously.

    To compete with Bangladesh and India; it is very important for Pakistan to offer the same products as they are exporting in large variety.

    It said the incentive amount should be directly credited to the exporter’s account at the time of realisation of export proceeds and SBP may subsequently claim the amount from the government. The condition of “after receipt” should be abolished and prompt payment shall be made. Otherwise, again backlog of payments to be made to exporters shall be created as previous payments of billions of rupees have not yet been made to the exporters.

    PRGMEA also proposed that since WEBOC system was available then why do exporters need to submit the hard copies for processing of rebate and DLTL claims. “As soon as the bank may report payment realisation on WEBOC, rebate and DLTL claims should be highlighted in Green and entitled for disbursement of refund,” they added.