Pkrevenue.com

Tag: budget proposals

  • Value added textile exporters demand 50 percent reduction in withholding tax

    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.

  • SECP suggests measures to document real estate sector

    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.

  • ACCA suggests imposing income tax on landowners

    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.

  • FBR urged to issue FTNs against withholding tax deduction

    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.

  • KTBA proposes amendments to automatic stay in recovery cases

    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.

  • Measures proposed to curb under invoicing by commercial importers

    Measures proposed to curb under invoicing by commercial importers

    KARACHI: Pakistan Business Council (PBC) has recommended the authorities to take additional measures to stop massive under invoicing by commercial importers.

    In its proposals for the budget 2021/2022, the PBC said that across the board massive under invoicing and dumping of imported products has been increasing.

    Information regarding values at which various custom check posts clear import consignments is not publicly available.

    This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues.

    There are massive leakages in the Afghan Transit Trade (ATT) and smuggled goods are being openly sold in all major shopping centers of the country.

    Customs however is not willing to act against smuggled products citing lack of cooperation from local authorities.

    The PBC recommended the following:

    a) Values at which import shipments are cleared through PRAL or CARE need to be publicly available.

    b) The Government of Pakistan must insist of Electronic Data Interchange (EDI), for both FTA and non-FTA imports from China. In future the requirement of EDI should be made compulsory for imports from FTA / PTA partner countries.

    c) Depending on industry, the Import Trade Price (ITP) be fixed e.g. on the basis of country of origin, weight, volume etc. after discussion with stakeholders. ITP’s may be fixed for most items prone to mis-declaration such as consumer goods and margins of commercial importers be monitored to assess the value of subsequent supply of imported goods. A certificate to this effect should be issued by auditors of commercial importers.

    d) For items, prone to under invoicing and mis-declaration, FBR should designate one or two ports (including the dry ports) for clearing of import consignments. This will allow better monitoring of the import consignments where chances of mis-declaration are on a higher side.

    e) Additionally, the old Customs General Order 25 needs to be revived with a provision that local manufacturers be given the option to buy at a 15% premium, any consignment which appears undervalued.

    f) Taxes and duties deposited by local manufacturers and commercial importers should be published.

    g) The rate of tax collected from commercial importers be increased by at least by 2%. Presently, tax collected from commercial importers is treated as Final Tax.

    In order to avoid burdening of genuine commercial importers, we would recommend that the income tax collected at import stage be treated as an advance tax.

    h) In order to allow commercial importers to claim adjustment of taxes deducted at import stage, commercial importers should be asked to present certificate from auditors that at least 70% of imported items have been exported or sold to registered manufacturers. This will also help increase the overall tax base.

    i) Monthly sales declared by commercial importers should be matched with sales declared in annual income tax return as well as the credit entries in all business bank accounts. In case of any discrepancy, a reconciliation with justifiable reasons should be submitted by the commercial importers

    j) Online CREST system must be amended in a way to trace sales along with value addition thereon of person to whom supplies were made by Commercial importers.

  • Massive rise in withholding tax rates proposed for non-filers

    Massive rise in withholding tax rates proposed for non-filers

    KARACHI: The concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy. However, no efforts were made to increase the tax base.

    Pakistan Business Council (PBC) in its proposals for budget 2021/2022 submitted to the Federal Board of Revenue (FBR), said that though large amounts are being collected from non-filers, no effort has been made to increase the tax base.

    “The non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers.”

    In order to broaden the tax base and to achieve increase in overall tax collection without burdening existing tax payers, the policy to increase tax on non-filers / unregistered persons should be implemented specifically in the following cases:

    a) unregistered industrial / commercial entities (not having STRN) having bill amount in excess of Rs. 20,000 per month, extra sales tax should be increased from 5 percent to 20 percent

    b) After collection of extra tax as referred above for a continuous period of 6 months, all these connections should be provisionally converted into NTN and STRNs and return filings from these connections should be enforced.

    c) In case of provisional registration as above, utility companies be directed to issue show cause notices where annual billing amount exceeds Rs.2.4 million and directing provisionally registered persons to obtain permanent registration. In case of non-compliance, utility companies be directed to disconnect utility connections.

    d) Moreover, in order to bring all commercial / industrial users in the tax net and to verify filer status, Electric distribution companies should provide one year to all such consumers to get their NTN registered with electricity distribution companies. In case of failure to provide NTN, electricity connection should be disconnected. Considering the fact that all industrial / commercial connections will be linked with NTN, the tax department will then be in a better position to assess the electricity consumed by commercial / industrial users and corroborate the same with amount of sales / production etc. reported in sales tax / income tax return.

    e) In order to bring all commercial / industrial users in the tax net and to verify filer status, Electric distribution companies should provide one year to all such consumers to get their NTN registered with them. Thereafter, such commercial/industrial consumers without NTN should be charged advance income tax @ 30 percent (from existing 12 percent) on their utility bills. Those with NTN but non-filer status be charged at 20 percent WHT.

    f) Residential consumers be made liable to provide NTN in case electricity bill amount exceeds Rs.1.2 million per year or levy advance income tax withholding of 20 percent.

    g) All exemptions (like exemption on agricultural income) under the Income Tax Law should only be made available to filers so that exempt income is also reported and wealth is reconciled.

    h) Withholding tax on International business class tickets under section 236L is same Rs. 16,000 for filer and non-filer, it should be increased to Rs. 50,000 for non-filers.

    i) Withholding tax @ 5 percent or Rs. 20,000, whichever is higher, is applicable under section 236D on all functions organized by filers as well as non-filers. Rate of withholding be increased for non-filers to Rs. 100,000 as minimum and no WHT from filer

    j) Function halls withholding tax on electric bills should be 30 percent which can be adjusted against tax liability by providing proof of tax deducted from their customers.

    k) Withholding income tax on interest income u/s 151 is 15 percent for filer and 30 percent for non-filer. Rate should be increased to 50 percent for non-filers in case interest income is more than Rs.2,000,000/-

    l) Annual private motor vehicle tax u/s 234 for non-filers is Rs. 9,000 for 1600cc-1999cc and Rs. 20,000 for 2000 cc and above. Rate for non-filers should be increased to Rs. 50,000 for 1600cc-1999cc and Rs. 200,000 for 2000 cc and above

    m) Advance income tax is collected on sales of immovable property under section 236C, which is 1 percent for both filers and non-filers, should be increased for non-filers to 10 percent for properties of 900 square yards or more

    n) Holding of land by non-filers should be made more expensive by asking those authorities collecting property tax (cantonment boards / societies / registrar) to collect adjustable advance income tax, from non-Filers, on behalf of the Federal Government as follows:

    o) Rs. 500,000 per year for 800 yards or more but less than 1800 yards

    p) Rs. 1 million per year for 1800 yards and above.

  • Cut in tobacco tax under consideration

    Cut in tobacco tax under consideration

    KARACHI: The government is considering to reduce the federal excise duty on cigarettes in order to discourage duty evasion and stop smuggling.

    Sources said that proposals had been invited from stakeholders to rationalize the duty structure on tobacco industry.

    The sources said that the authorities were considering to reduce the FED rate by 10 percent in the upcoming budget 2021/2022.

    They said that a strong lobby was behind pressure for reduction in the rate for tobacco industry. It is learnt that the duty rate was proposed to cut because of large volume of smuggled cigarettes available in the market.

    Interestingly, the health ministry had proposed to increase the levy in order to discourage the use of cigarettes.

    The sources said that after the proposed reduction on the tobacco industry, the country would become having the lowest amount of taxes on the cigarettes use.

    For the last two years the government was raising the duty rate on the tobacco industry. However, the stakeholders were demanding to reduce the rate in order to stop the smuggling.

    The sources said that total revenue collection from tobacco industry was around Rs130 billion. Meanwhile, the tobacco industry assured that with the proposed reduction in duty the revenue would ultimately increase.

    To some estimates, the country was losing around Rs77 billion due to smuggled cigarettes.

  • Rs5000 banknote proposed to withdraw from circulation

    Rs5000 banknote proposed to withdraw from circulation

    KARACHI: A former chairman of Federal Board of Revenue (FBR) has recommended the government to stop the circulation of Rs5000 banknote and phase out in circulation the banknote within one year.

    Syed Shabbar Zaidi, former FBR chairman, submitted his proposals for budget 2021/2022 to Prime Minister Imran Khan.

    “There has to be gradual evaporation of Rs5000 banknote. A time limit be prescribed up to which Rs5000 note will be valid say June 30, 2022 and in the meantime the same can be exchange with bank. This is completely different from Indian Scheme.”

    Shabbar Zaidi served the FBR as chairman during May 10, 2019 to January 06, 2020. Being a FBR chairman from private sector, he had taken major decisions during his stay despite bureaucratic hurdles.

    The suggestion to stop Rs5000 banknote from legal tender has importance because Prime Minister Imran Khan had on many occasion lauded Shabbar Zaidi.

    The proposal for withdrawal of Rs5000 banknote was not new as it had been submitted time to time for stopping corruption and black economy.

    Sources said that the office of the prime minister had forwarded the proposals of Shabbar Zaidi to the finance ministry for further consideration to make part of final proposals for budget 2021/2022.

  • FBR urged to allow CGT exemption to private companies

    FBR urged to allow CGT exemption to private companies

    KARACHI: Tax practitioners have demanded the Federal Board of Revenue (FBR) to allow capital gain tax (CGT) exemption to private companies in order to encourage corporatization in the country.

    (more…)