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Tag: FBR

FBR, Pakistan’s national tax collecting agency, plays a crucial role in the country’s economy. Pakistan Revenue is committed to providing readers with the latest updates and developments regarding FBR activities.

  • FBR recommended to exempt income tax on mortgage loans to facilitate salaried persons

    FBR recommended to exempt income tax on mortgage loans to facilitate salaried persons

    KARACHI: Federal Board of Revenue (FBR) has been recommended to exempt income tax on mortgage loans in order to facilitate salaried persons.

    Currently the loans obtained from the employer below Benchmark interest rate is subject to tax, said Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020.

    It recommended that the taxation of marginal income on loans obtained from the employer below benchmark rate should be exempted by deleting sub-section (7) of Section 13 of Income Tax Ordinance, 2001.

    Alternatively, the minimum threshold of the loan amount on which the provisions of Section 13(7) would not be attracted, should be raised to at least Rs2,500,000 from the existing limit of Rs1,000,000.

    Moreover, current benchmark rate of 10 percent of much higher than the prevailing KIBOR rates, therefore, benchmark rate should be reduced suitably to somewhere near KIBOR rate.

    “Alternatively, at least the mortgage loans should be exempted from the operation of Section 13(7) of the Income Tax Ordinance, 2001.”

    The institute said that this is not a significant source of revenue for the Government on the one hand and very rigid piece of legislation on the salaried taxpayer on the other hand who are hard hit by the present economic situation.

    The taxation of this notional income is highly unjust since it taxes the notional income of the salaried person, which is against the basic principle of taxation since this notional income will never ever be received by the taxpayer.

    Similar notional income in the hands of employees of educational institutions, restaurants, hospitals, clinics etc. is already exempt under clause (53A) of Part I of Second Schedule.

    The rationale underlying this proposal is that:

    a) It will boost the housing industry since in today’s economic situation and the presence of speculators in the property market it is next to impossible for a salaried employee to own a house on commercial mark-up rates. Once this industry takes off there will be provision of cheap houses and there will be increase in tax revenue from housing and allied sector;

    b) It will contribute in enhancing the national economic activity by extending affordable loans and advances to middle class income group of society;

    c) It will remove detrimental financial ramifications due to incremental rate of interest on notional income for all other salaried persons, who are already facing a tough challenge to survive within their paltry resources- all legally declared and tax paid; and

    d) The FBR is also cognizant of this fact by stating in Clause (53A) that “any other perquisite or benefit for which the employer does not have to bear any marginal cost; and the Circular Letter 4(8)IT-J/91 dated June 30, 1991 issued by then CBR opines that “…it is not desirable to tax such notional income…”. The same principle should be applied in this situation.

  • FBR suggested abolishing withholding tax for corporate manufacturers

    FBR suggested abolishing withholding tax for corporate manufacturers

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish withholding tax on import stage for corporate manufacturers in order to attract investment in the country.

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  • IR officers barred from suspending registration, raiding business premises of tax defaulters

    IR officers barred from suspending registration, raiding business premises of tax defaulters

    ISLAMABAD: The offices of Inland Revenue have been barred from taking harsh action against tax defaulters such as suspending registration and raiding business premises on suspicions of tax evasion.

    The newly appointed chairman of Federal Board of Revenue (FBR) Shabbar Zaidi issued more directives on Tuesday to restrict the IR officers for using discretionary powers.

    The federal government appointed the chairman from private sector for enhancing revenue collection through strengthening operation side. The policy side of taxation matters has already been with the ministry of finance.

    The chairman soon after assuming the charge issued directives to the field offices of the FBR that no bank account would be attached of a taxpayer without informing 24 hours prior taking any action. Further obtaining permission from FBR chairman has been made mandatory for freezing any bank account.

    The chairman on Tuesday issued more instructions to the field offices of Inland Revenue, which stated: “There will be no suspension from active taxpayers list unless there is personal interaction with CEO/owner of the business 24 hours before suspension, list of all cases of suspension after suspension will be sent to chairman FBR and Member IR operations with reasons of suspension and evidence of personal interaction as discussed above.”

    The chairman further directed: “There will no be no raid or any premises of any existing taxpayer without prior approval of Member IR Operations and Chairman. If there are evidences of economic transactions which are chargeable to tax and the organization/entity is not a tax registered person then officer of that jurisdiction will report it to the Member IR Operations and Chairman FBR who will provide necessary direction for future course of action.”

  • FPCCI invites FBR chairman for budget proposals discussions

    FPCCI invites FBR chairman for budget proposals discussions

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has invited Shabbar Zaidi, Chairman of Federal Board of Revenue (FBR) to discuss budget proposals.

    A statement issued on Tuesday said that the President FPCCI Engr. Daroo Khan Achakzai alongwith Abdul Waheed Sheikh, Ijaz Khan Abbasi, Qurban Ali and Shireen Arshad Khan, Vice Presidents of FPCCI visited the office of Shabbar Zaidi congratulating him on assuming the charge of Chairman FBR.

    During the meeting the President FPCCI discussed various measures and proposals particularly for enhancement in number of tax payers and to increase their confidence level to achieve the set targets of revenues.

    Engr. Daroo Khan Achakzai further said that misuse of powers by the tax authorities is creating trust deficit and lack of confidence.

    The FPCCI Chief hailed the prompt decisions taken by the FBR’s Chairman in facilitating and providing relief to the taxpayers such as “Suspension of raid on any premises of any existing taxpayer without prior approval of Member IR – Operation and Chairman FBR”.

    Moreover, the FPCCI President also appreciated the Chairman FBR for not suspending any Active Taxpayer from Active Taxpayer List unless there is personal interaction with the assessee 24 hours before suspension and monitoring himself the list of all cases of suspension. The President of FPCCI also lauded Shabbar Zaidi, Chairman, FBR for not freezing bank account without prior intimation and notice to the bank account holder. The FBR Chief further said that the real estate is fast growing sector of the economy and FBR will devise various reforms. The tax amnesty scheme is also under process and will be announced soon, he stated.

    The President FPCCI Engr. Daroo Khan Achakzai invited the Chairman FBR to visit FPCCI Headquarter at Karachi and its Capital Office Islamabad to discuss FPCCI’s budget proposals and to share vision to revamp the tax system and machinery which is now the need of hour to be shifted in effective automated system to facilitate the taxpayers.

    The Chairman FBR agreed to visit the FPCCI soon to get feedback and first-hand information from FPCCI members and apprised them of FBR’s stance / point of view.

  • FBR advised making declaration of fund source mandatory for foreign remittances

    FBR advised making declaration of fund source mandatory for foreign remittances

    KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the declaration of source of funds for foreign remittances.

    Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 recommended changes to Section 111(4) of Income Tax Ordinance, 2001 regarding foreign exchange remitted from outside Pakistan.

    The association recommended amendment:

    “to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect … and a declaration along-with evidence of the source of funds.”

    It said that this will continue to promote the inflow of foreign exchange remittances towards the country while stopping the misuse of the provision to whiten/launder black monies and de-incentivizing genuine tax paying businesses.

    “This way, the ‘non enquiry’ clause which has been extensively abused, will be abolished sans the current monetary limit while still retaining the tax relief for foreign exchange remittance.

    The ACCA further said that the minimum tax on turnover is charged irrespective of the net profit or loss.

    This often gives rise to a situation where businesses end up paying double taxes on their revenues and profits as well as loss making businesses facing additional cash-flow pressures by paying this tax.

    The current rate of 1.25 percent applicable generally except for a few sectors, should be brought down to 0.4 percent.

    The now deleted exception in case of a gross loss needs to be reinstated in line with the principles of natural justice and equity.

    This will facilitate the business eco-system contributing to a growth in GPD which can lead to increased revenue collections for the treasury.

    The association further highlighted Section 138 and 140 of the Ordinance regarding recovery of tax through attachment of bank accounts and/or property or arrest.

    It said that currently, the allowance for the commissioner to attach the property of the taxpayer before expiry of notice period on “satisfaction” of the commissioner regarding possible removal, cancellation or disposal of attachable property is misused in many cases to harass the businesses.

    This change can bring an end to this, increase taxpayers’ trust in the tax apparatus and improve the ease of doing business in the country.

    “Any such attachment of any movable/immovable property before expiry of the notice period may only be authorized by the Commissioner in the presence of objective evidence, which should be shared with the taxpayer.”

  • FBR suggested to abolish FTR for commercial importers

    FBR suggested to abolish FTR for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish Final Tax Regime (FTR) for commercial importers and other segment of the economy in order to make the taxation system equitable.

    FBR sources said that suggestions had been received from business community and large business houses to eliminate the FTR and presumptive tax regime.

    The sources said that large private sector entities and chartered accountants urged the newly appointed chairman Shabbar Zaidi, who is also a chartered accountant and had represented Institute of Chartered Accountants of Pakistan (ICAP), to status of normal tax regime for commercial importers should be restored.

    The ICAP in its tax proposal for tax year 2019/2020 said that certain sectors/goods are being taxed under the presumptive/value added/ fixed/ final tax regimes.

    Pakistan Business Council (PBC) also said that the presumptive/value added/fixed/final tax regimes are taxing turnover as opposed to income. In addition, entities availing this regime are not required to file tax returns.

    “Under garb of the FTR, massive evasion of customs duties and sales tax are taking place putting the formal sector under undue pressure.”

    The informal economy has outgrown the formal economy and the major driver of this has been the FTR.

    The FBR said that the chartered accountants were strongly supporting elimination of FTR for commercial importers and recommended: “commercial importers status under Normal Tax Regime as introduced through the Finance Act, 2018 should be restored.”

    They said that the presumptive/ value added/ fixed / final tax regime should be replaced with a normal tax regime.

    Income has to be the only basis for taxation and option to exit the tax chain should not be available for whatever reason.

  • FBR recommended imposing environmental tax on industries producing polluting materials

    FBR recommended imposing environmental tax on industries producing polluting materials

    KARACHI: Federal Board of Revenue (FBR) has been suggested to impose environmental tax on industries producing non-renewable and polluting materials.

    Pakistan has a wide range of industries, which are involved in usage and production of nonrenewable, polluting materials that are extremely harmful for our environment.

    “There are many entities, AOPs and sole proprietors who are not taxed because they either do not have taxable income or, they do not intend to disclose it properly while conducting their businesses that are damaging country’s environment,” said Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020..

    The institute recommended that higher tax should be levied at non-renewable, polluting inputs and outputs, such as coal, automobiles, chlorine, phosphate detergents, chemical pesticides, chemical fertilizers, lead acid batteries and plastic etc.

    “As an incentive, the organizations taking measures to preserve the environment may be made eligible for a tax credit,” it further suggested.

    Pakistan is already lacking behind other developed and developing countries who are taking measures to safeguard their ecosystem.

    “Introduction of this tax and tax credit would not only increase tax revenue and encourage multiple entities to file their return of income in order to avail the tax credit, but Pakistan will also be recognized as a country, which is taking an initiative to safeguard the environment,” ICAP suggested.

  • Restriction on gold purchase by non-filers proposed

    Restriction on gold purchase by non-filers proposed

    KARACHI: Federal Board of Revenue (FBR) has been suggested to restrict non-filers of income tax returns from purchasing gold bars, jewelry and other luxury goods in order to broaden tax net.

    “In addition to the restriction on purchase of immovable property and motor vehicles by non-filers, the punishment should be made even severe by foisting a restriction or imposing an additional charge of tax, on non-filers upon purchase of other luxury goods, including gold bars and jewelry, paintings, antiques, electronics etc.”

    The suggestions were made by Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020 in order to broaden the tax base and documentation of economy.

    The institute said that the proposed restriction would eradicate the indifference between a filer and non-filer, and giving a sense of benefit to the filers, while non- filers should be penalized heavily.

    Giving recommendations and rationales in this regard it said:

    — Increase withholding income tax and sales tax for non-filers/unregistered persons by 50 percent higher rates; ‘further tax’ on sale to unregistered person should be increased to 5 percent.

    — Extra tax on commercial and industrial utilities connection should be increased to 15 percent for unregistered person.

    — Separate teams should be made and assigned responsibilities to visit the local shops, retail outlets and services providers to verify that proper sales tax invoices are generated and persons are registered with revenue authorities, if not they should be heavily penalized and compulsorily registered.

    — All utility connections amounting to Rs2.4 million or more of non-filers should be forced to get registered by issuance of Show-Cause Notices.

    In case of noncompliance, their utility connections should be disconnected.

    — An additional charge of tax should be foisted on non-filers upon purchase of luxury goods, such as gold bars and jewelry, paintings, antiques, electronics etc.

  • Younus Dagha assigned additional charge of secretary revenue division

    Younus Dagha assigned additional charge of secretary revenue division

    ISLAMABAD: The federal government has assigned additional charge of secretary revenue division to Muhammad Younus Dagha, who is already serving as Secretary Finance.

    A notification issued on Friday by Establishment Division stated that Mohammad Younus Dagha, a BS-22 officer of Pakistan Administrative Service, presently serving as Secretary Finance Division, is assigned additional charge of the post of Secretary Revenue Division for a period of three months or till the posting of a regular incumbent; whichever is earlier, with immediate effect.

    The government a day earlier issued notification to appoint Shabbar Zaidi as the chairman of Federal Board of Revenue (FBR).

    Usually the chairman FBR is by virtue is also secretary revenue division. Since Zaidi has been picked from the private sector and he is not eligible to serve on a bureaucratic post.

    Therefore, the government assigned the additional charge to Mohammad Younus Dagha to serve as secretary revenue division.

  • No bank account freezing without informing taxpayer: FBR chairman

    No bank account freezing without informing taxpayer: FBR chairman

    ISLAMABAD: Shabbar Zaidi, the newly appointed Chairman of the Federal Board of Revenue (FBR), has made a swift impact by issuing new directives aimed at improving transparency and taxpayer relations. In his first major move after assuming office, Zaidi directed that no taxpayer’s bank account would be frozen without prior notice, ensuring that taxpayers are informed at least 24 hours in advance.

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