Tag: Federal Board of Revenue

The Federal Board of Revenue is Pakistan’s apex tax agency, overseeing tax collection and policies. Pakistan Revenue is committed to providing timely updates on the Federal Board of Revenue to its readers.

Higher duty rates proposed for car, luxury items import

KARACHI: The Federal Board of Revenue (FBR) has been suggested to impose higher rates of duties on import of non-essential and luxury items in order to reduce current account deficit.

Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 said that tangible measures should be taken to reduce the import burden.

“Heavy duties should be levied on all non-essential imports like expensive electronics, cars & luxury items.”

In addition incentives should be announced for local industry to encourage domestic products, it suggested.

In other key reforms, the ACCA said that agricultural sector needs to be re-evaluated.

Being an agricultural country its GDP share must be according to its volume. Currently its share in GDP is 24 percent while it has the potential to reach up to 55 percent.

Large landowners should be taxed at minimal rates i.e. 7 percent with that revenue used to subsidize seeds, fertilizers, water, electricity, fuel, etc. for the small farmers.

Cheap and low quality smuggling and imports from India should be controlled.

The ACCA said that for Pakistan, a country of 220 million people, human capital is a huge resource in new era, but unfortunately due to incompetent and poor policies we are unable to convert this power in to workable force, un-employment has increased to almost 6 percent and over 4 million people are unemployed.

Keeping in view the above indicators the government needs to encourage services sectors, new industries and agriculture.

Banking sector should be used to incentivize and promote a culture of entrepreneurship.

Incentives must be announced for Services sectors particularly Telecom, home based industries, young entrepreneurship programs with special focus on women.

May 18, 2019
FBR chairman agrees on abolishing withholding tax on raw materials

KARACHI: Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) on Saturday asked business community to provide list of raw material for reducing tax rates on import stage.

Addressing the business community at Karachi Chamber of Commerce and Industry (KCCI), Shabbar Zaidi agreed with the business community that there should not be withholding tax on import of raw material.

The KCCI members raised the issue that withholding tax rates ranging 3 percent to 6 percent were imposed on import of raw materials.

“Yes. There should not be withholding tax on raw material,” Zaidi said and asked the KCCI to provide list for taking action before the next budget.

Talking on Amnesty Scheme – 2019, the chairman said that the asset declaration scheme was clear and there was no ambiguity.

He said that the scheme would be part of the Finance Bill for formal approval from the parliament and it would be the same as promulgated through the presidential ordinance.

The chairman said that the rules were being formulated for intending declarants.

Shabbar Zaidi also talked about smuggling and misuse of tax concessions.

He said that tax relief may be given to small number of raw materials but it cannot be extended to all imported goods.

He said that Afghan Transit Trade was used for smuggling into Pakistan. “But there are other ways to import illegal goods into the country,” he added.

The chairman asked the business community that once they declare the smuggled goods were illegal for selling in the local market. “If the business community support and promise there will be no protest then the raids against illicit goods will be launched from tomorrow,” the chairman added.

May 18, 2019
Elimination of regulatory duty, additional customs duty on essential raw materials recommended

KARACHI: Federal Board of Revenue (FBR) has been suggested to eliminate additional customs duty and regulatory duty on essential raw materials.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals recommended tariff rationalization in the forthcoming for budget 2019/2020.

It recommended elimination of additional custom duty and regulatory duty on essential raw materials, which are either not locally available or in limited supply, used for local manufacturing.

The OICCI – the representative body of foreign investors – also suggested bringing illicit trade into tax ambit.

It said that on the basis of survey conducted by OICCI amongst its members, losses to the government exchequer due to Illicit trade (business in products which are either smuggled, counterfeit, under-invoiced imports, sold by unregistered manufacturer/seller, etc.) is estimated at Rs200 billion (tobacco alone estimated at Rs63 billion only).

In order to control the Afghan Transit Trade, it recommended:

Harmonize duty and tax rates to remove the incentive for evasion.

Fix quantitative limits for imports based on genuine Afghan needs and size of population.

Establish a basis of collecting duty/taxes at the point of entry into Pakistan for the account of the Afghanistan Government

Fix import value in consultation with the brand owner in Pakistan.

Customs procedures and Cross-border rules should be published for transparency.

Containers coming back from Afghanistan should be checked by customs.

There should be a negative list of items which are not utilized in Afghanistan; yet are imported and make their way into Pakistan.

Streamlining of border crossing procedures on financial guarantee by banks and anti‐corruption measures.

Export to Afghanistan be facilitated with simplified procedure by FBR and border control authorities.

For stringent controls illicit trade, it recommended:

Introduce tighter penalties for illicit trade across categories, including criminal liability across the value chain, including retailers, distributors and manufacturers

Introduce a special division/ task force to raid retailers and manufacturers to confiscate and destroy illicit stocks

Launch a media campaign to increase awareness in consumers of the harms of illicit products and discourage them from purchasing such products

The OICCI suggested structural reforms in the customs:

Do a thorough review of the custom regime, in consultation with brand owners, to address issues of counterfeiting, smuggling, and rationalization of duty structure and fixing of import Tariff prices.

Custom valuation should be done on modern lines through online search and matching international and regional pricing and taking local legal importers of items on board.

IPR (Intellectual Property Rights) laws implementation in Pakistan need to be strengthened. Special IPR tribunals may be formed for speedy trials leading towards IPR compliance at par with international standards of IPR enforceability.

Unauthorized imports of counterfeit products should be effectively checked through registration of brands with the custom authorities in coordination with the original brand owner/ registered in Pakistan.

Valuation ruling should be issued in consultation with the owner of the brand or its authorized representative.

The data of import should be public (restrictively) to ensure transparency and this will also help in taking over of goods under section 25A of the Custom Act, 1969.

Related Stories

FBR notifies elimination, reduction of regulatory duties on several raw materials; issues SRO

May 18, 2019
FBR advised reducing income tax to half for exporters other than five zero-rated sectors

KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce the income tax rate to half for exporters not falling under five zero-rating scheme in order to promote and diversification of exports.

Pakistan Business Council (PBC) in its tax proposals for forthcoming budget 2019/2020 said that at present the rate of tax deduction on export proceeds under Section 154 of Income Tax Ordinance, 2001 is one percent, which is same as for five export oriented sector as well as for other than five sectors.

The council said that in order to promote diversification of exports instead of relying on only five specified sectors, rate of tax on export proceeds should be reduced to 0.5 percent from one percent for sectors which are not covered under the five specified export oriented sectors.

Giving rationale for the change, it said that at present sales tax zero rating is available to five specified export oriented sectors on their input materials whereas such benefit is not available to other potential export sectors.

Moreover, gas supply is also available to five specified sectors at 600/MMBTU whereas rate of gas per MMBTU for non-conventional sectors is Rs780 in addition to GIDC, which makes potential export uncompetitive and consequently, Pakistan is unable to diversify export markets.

“In order to compensate such exporters and to promote export of other than five sectors, rate should be decreased to five percent for such sectors,” the PBC recommended.

The PBC further pointed out that manufacturing bond/DTRE rules are cumbersome and in certain cases lack clarity whereby many potential exporters cannot avail them. Consequently, it results in lost exports.

Therefore, it is recommended that manufacturing bond/DTRE rules should be modified to make it easily accessible and lend full clarity to allow exporters to fulfill potential export orders.

The proposed amendment would increase exports by facilitating existing and potential exporters.

May 17, 2019
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.

May 16, 2019
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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May 16, 2019
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.”

May 14, 2019
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.

May 14, 2019
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.”

May 14, 2019
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.

May 12, 2019