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Tag: budget proposals

  • FTO recommends 20 percent increase in withholding tax rates

    FTO recommends 20 percent increase in withholding tax rates

    KARACHI: Federal Tax Ombudsman (FTO) has recommended 20 percent increase in adjustable withholding taxes in order to encourage income tax return filing.

    However, this deduction of withholding tax should not apply on salary income, the FTO said in its recommendation for federal budget 2019/2020.

    In order to encourage taxpayers to e-file income tax returns for claiming adjustment of adjustable withholding taxes, it was proposed that gradually all adjustable withholding taxes, excluding those on salary income, might be enhanced by at least 20 percent in the coming budget.

    The FTO also proposed that all current non-adjustable withholding taxes may be converted into adjustable withholding taxes by amending the relevant provisions of the income tax laws/rules.

    Further, in order to provide rights to taxpayers, the FTO said that a taxpayer should be given the right to approach the commissioner for the revision of assessment, as was available under original Section 138 of the Income Tax Ordinance, 2001.

    The FTO further suggested that income from pension was exempted from income tax, but pensioners were not eligible to avail benefits of provisions of withholding tax unless they were on active taxpayers list. It was therefore proposed that pensioners deriving income from pension only, be exempted from the provisions of withholding taxes applicable to non-filers.

  • PSX proposes scheme for attracting investment from black economy

    PSX proposes scheme for attracting investment from black economy

    KARACHI: Pakistan Stock Exchange (PSX) has advised the government to introduce a scheme for attracting investment from large black economy.

    In its budget proposals for fiscal year 2019/2020 the stock exchange advised the government to introduce a mechanism and regulatory structure for the launch of registered savings and investment accounts (RSIA) to help channel savings towards productive investments.

    “RSIAs will help capital from the large undocumented sector into the formal economy. Further. It is also crucial firm guarantees be offered that contributions be subject to full amnesty – aside from Anti-Money Laundering and Terrorist Financing issues diligence.”

    Giving rationale to its proposal, the PSX said that where they have been introduced, registered savings and investment accounts have been very successful in channeling saving to productive investments through capital markets and often constituents the main source of income in retirement.

    In Pakistan, they will bring the added benefit of driving the government’s goal to document the informal sector.

    RSIAs could become one of the driving forces in the transformation of Pakistan’s economy. By some estimates, 40 million middle-class Pakistanis have an average accumulated wealth of $10,000 for a total over Rs50 trillion.

    “Much of that wealth is currently investment in real estate, gold and other asset classes in Pakistan and offshore. If RSIAs can capture 10 percent of that wealth, it would be equivalent to more than half the current market capitalization of PSX listed companies or more than the outstanding amount of PIBs and Sukuks.

    The stock market proposed the new scheme to be introduced in the Income Tax Ordinance, 2001.

    The PSX recommended that initially there should be no limit to the amount an investor can contribute to a RSIA. “In this way, the government would maximize the benefits of RSIAs described above, including tax revenue upon withdrawal. Furthermore, unlike VPSs, no tax credit should be given with regard to contributed amounts.”

    It is further recommended that all income within the account such as capital gains and dividends should be tax free, like VPSs. It is this feature and the opportunity to legally invest in capital market instruments that will attract capital from the informal sector.

    “Investment should be limited to listed equities, ETFs, tradable bonds and mutual funds. Principle-based prudential rules must be adopted to ensure protection of client assets and suitability of investments.”

    The PSX said that withdrawals should be treated a taxable income because contributions are presumed to have been made from sources that have not been taxed.

    “Unlike VPSs, investors should be allowed to withdraw capital from the account any time they want. That feature is key in attracting capital from wealthy individuals who may otherwise not want to lock up their capital.”

  • PSX recommends CGT exemption to foreign investors

    PSX recommends CGT exemption to foreign investors

    KARACHI: Pakistan Stock Exchange (PSX) has proposed to exempt capital gain tax (CGT) on disposal of securities by foreign investors.

    The PSX in its proposals for budget 2019/2020 on Thursday, recommended the exemption of CGT on disposal of securities by foreign investors.

    Giving rationale to its proposals, the PSX said that the exemption of CGT on foreign investors would facilitate substantial capital inflow by relaxing the cumbersome and time consuming account opening and registration process for foreigners as they get discouraged and overwhelmed with the current registration structure and look for better investment alternatives in regional markets.

    It further said that Pakistan has taxation treaties with a number of countries thus foreigners would be liable to pay taxes according to the treaty. “Therefore, taxing foreigners would burden them and not only increase their cost of business but most importantly discourage them from investment in Pakistan’s capital market.”

    It is proposed that the proviso to sub – rule 2 of Rule 13N of Income Tax Rules, 2002 shall be omitted.

    The PSX said that it is observed that most countries do not impose capital gains tax on disposal of securities by foreigners.

    Bangladesh, Malaysia, and many other countries do not levy CGT on transactions of disposal of securities conducted by foreigners.

    Even in countries that do have CGT on foreign investors, the rules are distinctly different from those that apply to domestic investors, in order to provide an attractive tax environment and avoid double taxation.

    One important reason for not imposing such tax is that most of the countries have double taxation treaties.

    In Pakistan, foreign investors file income tax returns regularly and pay taxes in accordance with the provisions of the Income Tax Ordinance, 2001 or reduced rates provided under treaties executed with such countries.

    Foreign investors should be given preferential tax rates as they might still be required to pay taxes in their home country where they are considered as a resident taxpayer.

    The PSX also urged the tax authorities to review the mechanism for payment of CGT on disposal of securities for domestic investors.

    It said that at present National Clearing Company of Pakistan Limited (NCCPL) calculates and collects Withholding Tax on Capital Gains made on disposal of shares listed on Pakistan Stock Exchange Limited.

    However, it is witnessed that in many countries there is no capital gain tax collected by any institution but rather individuals/ corporate are required to file their tax returns and pay taxes if any on the capital gains made by trading of shares.

    A broad range of countries including Canada, USA, Indonesia, India, and Vietnam do not mandate the collection of CGT by any intermediary at the time of disposal of securities, and the CGT is payable at the time of filling of returns.

    In Singapore, Hong Kong, Malaysia and Mauritius there is no capital gains tax.

    Therefore, considering international perspective, it would be appropriate if in Pakistan, payment of capital gains tax be made obligatory on individuals and corporates and the status of NCCPL should be such that only the information is provided to the tax authorities by NCCPL.

    In line with the common practice internationally, the government should review and revise the mechanism for payment of tax on capital gains for filers.

    An alternative to the current convention should be explored along with pros and cons. Withholding tax at NCCPL level for filers should be debated thoroughly and replaced with the obligation on investors who are filer to pay CGT through annual tax returns.

    However, the current mechanism of withholding on CGT for investors who are non-filers shall remain the same provided no WHT on such non-filers whose Capital Gains is up to Rs100,000 per annum.

    In any case, NCCPL should provide information on all investors’ capital gains and losses to tax authorities for tracking purposes.

    In line with international practice for collection of capital gains tax, an obligation to file returns and pay taxes on disposal of securities at year end would encourage a widespread tax culture among investors.

    It is proposed that section 100B, 8th Schedule to the Income Tax Ordinance 2001 and Rule 13N of Income Tax Rules, 2002 shall be amended accordingly.

  • KTBA, RTOs discuss budget proposals

    KTBA, RTOs discuss budget proposals

    KARACHI: The office bearers of Karachi Tax Bar Association (KTBA) discussed budget proposals 2019/2020 with Chief Commissioners of Inland Revenue on Wednesday.

    The chief commissioners Inland Revenue from Regional Tax Offices (RTOs) Karachi including Shafqat Kehar, Badaruddin Ahmed Qureshi and Muhammad Ali Khan.

    The chief commissioners visited the KTBA and met newly elected office bearers.

    Both the sides discussed budgetary proposals and other matters of common interest.

    KTBA president Rehan Siddiqi apprised the senior tax officials about the problems faced by members of the bar.

    He suggested measures to improve understanding between tax departments and tax practitioners.

    The chief commissioners assured full support to remove trust gap between tax collector and taxpayers and underscored the need to broaden the tax base.

    The chief commissioners sought bar’s help for the purpose which was assured by the KTBA president as such both sides further agreed to keep in touch to resolve issues.

  • Freezing bank account, raid only on discovery of evasion: KCCI

    Freezing bank account, raid only on discovery of evasion: KCCI

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has recommended that harsh measures of freezing bank account and raid should only be undertaken on discovery of massive tax evasion.

    A delegation of KCCI held discussions on Budget Proposals for Federal Budget 2019-2020 with Chairman Federal Board of Revenue (FBR) Jehanzaib Khan and his team at a meeting held at FBR House in Islamabad on Thursday.

    The KCCI team suggested that such harsh actions will only be taken in case of when evasion of very large amount is detected and only when concrete evidence is available rather than carrying out random raids on business entities.

    KCCI’s delegation, which was led by Chairman Businessmen Group & Former President KCCI Siraj Kassam Teli, comprised of Vice Chairmen BMG Haroon Farooki and Anjum Nisar, General Secretary BMG AQ Khalil, President KCCI Junaid Esmail Makda and Former Senior Vice President Muhammad Ibrahim Kasumbi while Dr. Hamid Ateeq Sarwar Member (Inland Revenue Policy), Muhammad Javed Ghani Member (Customs Policy) and Chief of Income Tax, Chief of Sales Tax and Chief of Excise Duty and others were also present at the meeting.

    During the meeting, consensus was developed on various major issues and the FBR officials, while agreeing to most of KCCI’s budget proposals, assured to implement the same in the upcoming budget.

    The FBR Officials, while responding to KCCI’s proposal, agreed to rationalize the tax structure for import of raw materials by commercial importers and manufacturers.

    They also committed to review and curtail the discretionary powers vested to the officials of Inland Revenue which are a source of harassment and extortion of business and industrial community.

    KCCI delegation highlighted all major issues including issues pertaining to the Income Tax, Sales Tax and discretionary powers along with concessions & exemptions in various sectors of the economy which have resulted in the distortion of the tax regime.

    In his remarks, Chairman BMG & Former President KCCI Siraj Kassam Teli pointed out that the current tax regime, relevant laws and discretionary powers were being used to harass the business and industrial community and were hindering economic and industrial growth.

    “These laws have to be reformed in order to create a conducive environment for growth and liberalization of trade and also for the revival of economic activities”, he added.

    On the occasion, a comprehensive presentation was also given to the FBR team in which major taxation issues were highlighted and remedial steps were also given for ease of doing business and enhanced revenue generation.

  • Doctors, lawyers earning huge money but not on tax net: FPCCI

    Doctors, lawyers earning huge money but not on tax net: FPCCI

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to bring professionals into tax net as they are not documented despite earning huge money.

    In its proposals for Budget 2019/2020, the apex trade body said that the professionals including doctors and lawyers should be taxed as large number of those professionals was not documented despite earning huge money.

    The FPCCI said that the government should make a comprehensive policy to encourage the people to establish industries in the country.

    The government should announce tax exemptions for 10 years to those who set up their industrial units within a time period of three years.

    The FPCCI said industrialization would help increase in employment opportunities and it would also generate more revenues for the government through indirect tax.

    Besides, industrial units should be provided cheaper electricity to make them more competitive.

    The national chamber also suggested the government to expand the tax net by documenting the economy. It said that retailers and small shopkeepers should be brought into tax net but rate of tax on them should not be more than one percent.

    Further, the FPCCI said that tax rates on immovable properties should be reduced in order to enhance valuation near to fair market value.

    The FPCCI also demanded that the sales tax should immediately be reduced from current 17 percent to 15 percent and it should further gradually reduced by one percent per annum.

    Corporate sector is heavily taxed at the rate of 29 percent which is too high and should be cut down to 25 percent. While, individual tax should be reduced as it is too much high at 20 percent.

  • FBR may redefine motor vehicle for withholding tax collection

    FBR may redefine motor vehicle for withholding tax collection

    KARACHI: Federal Board of Revenue (FBR) to recommend the government to redefine withholding tax on motor vehicles to bring construction and heavy vehicles into tax net.

    The FBR sources said that the FBR may propose amendment to Section 231B(7) of Income Tax Ordinance, 2001.

    This section presently defined motor vehicle, including car, jeep, van, sports, utility vehicle, pick up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.

    The proposed amendment to section is:

    “Motor vehicle includes car ,jeep, van, sports, utility vehicle, pick up trucks for private use, caravan automobile , limousine , wagon and any other automobile used for private purpose, any mechanically propelled vehicle adapted for use upon roads whether the powers of propulsion in transmitted thereto from an external or internal source, and includes a chassis to which a body has not been attached, a tractor and a trailer, a combined harvester, a rig, a fork lifter a road roller, construction and earth moving machinery such as a wheel loader, a crane, an excavator, a grader, a dozer and a pipe layer, a road making and road/sewerage cleaning plant and any other motor vehicle as defined under provincial Motor Vehicles Ordinance 1965 and any other law.”

  • RTO Karachi recommends revival of minimum tax for commercial importers in budget 2019/2020

    RTO Karachi recommends revival of minimum tax for commercial importers in budget 2019/2020

    KARACHI: Regional Tax Office (RTO) – II Karachi has recommended revival of minimum tax regime for commercial importers in the budget 2019/2020.

    According to budget proposals sent to Federal Board of Revenue (FBR), the RTO-II Karachi recommended that Final Tax Regime for commercial importers should be withdrawn as it was creating distortion in the taxation system.

    Sources said the FBR had been asked that the scope of Minimum Tax Regime (MTR) should be extended to commercial importers under Section 148 of the Income Tax Ordinance 2001 and for of goods under Section 153(I) and execution of contracts under section 153(1)(c) and Section 233 of the ordinance.

    The RTO-II said that presently, the entire FTR sector, especially the commercial importers (by paying more six percent of tax), are at liberty to declare imputable income of their choice to explain assets or expenses.

    This provision would bring them at par with other taxpayers, who do not enjoy this luxury, the FBR informed.

    The RTO-II Karachi proposed concept of imputable income from FTR receipts: Section 169(4) which was ommitted through Finance Act 2004 may be re-incorporated in law.

    This proposals should be made part of the budget in order to discourage those taxpayers who take undue benefit of provisions of law related to final tax regime and whiten those assets / incomes as well which are not from FTR recipts.

  • FPCCI recommends single digit sales tax rate

    FPCCI recommends single digit sales tax rate

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed reducing sales tax to single digit from existing 17 percent. In its pre-budget conference on Wednesday, the apex trade body present its set of proposals for budget 2019/2020.

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  • FBR extends last date for submitting customs proposals for budget 2019/2020

    FBR extends last date for submitting customs proposals for budget 2019/2020

    ISLAMABAD: Federal Board of Revenue (FBR) has extended the last date for submitting customs related budget proposals for 2019/2020.

    In a notification to all chambers and association, the FBR said that the board issued a letter on January 25, 2019 for submitting customs proposals for budget 2019/2020.

    The proposals would cover three areas i.e. changes in Customs Tariff rates, Rules/Procedures and Customs Act, 1969.

    The FBR said that to enable the Customs Wing of the FBR to properly process and evaluate each proposal, three separate formats had been attached to the letter for preparing the proposals on MS Excel Sheets.

    The FBR said that while formulating the proposals, provision of the existing customs tariff rates/law may carefully be studied/consulted.

    Wherever required the proposal may be supported with the statistical data etc. so that it is not dropped on account of any such infirmity.

    In case of local manufacturer claiming tariff protection on its finished products or concession o its raw materials, complete given annexure as well, without which it would not be possible to process these types of proposals.

    It is requires that the proposals may be sent to the FBR by March 25, 2019.

    The government is scheduled to announce the budget 2019/2020 in the first week of June 2019.