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Tag: FPCCI

  • Tax authorities consider reducing minimum tax rate: Zeeshan Merchant

    Tax authorities consider reducing minimum tax rate: Zeeshan Merchant

    KARACHI: Tax authorities have agreed to consider reducing minimum tax rate for corporate sector and individuals in the upcoming budget, especially in the wake of financial losses due to coronavirus pandemic, a senior tax consultant said.

    “In different meetings with Dr. Abdul Hafeez Shaikh, Finance Advisor to Prime Minister, Razak Dawood, Commerce Advisor to PM and senior officers of Federal Board of Revenue (FBR) have agreed to reduce minimum tax rate for providing relief to mitigate adverse impact of coronavirus,” Zeeshan Merchant, former vice president of Karachi Tax Bar Association (KTBA) said this while talking to PkRevenue.com.

    Merchant, who is also honorary consultant to Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said that the actual proposal for the budget 2020/2021 is to reduce minimum tax rate for corporate sector to 0.5 percent and abolish this tax for two years in case of individuals and Association of Persons (AOPs).

    He said that in meetings Dr. Abdul Hafeez Shaikh and Abdul Razak Dawood appreciated the proposals and promised to consider in the budget for providing maximum relief to businesses.

    Merchant further said that the FBR chairperson also pledged to move this proposals after consideration for incorporation in the Finance Bill 2020.

    He said that due to coronavirus and subsequent lockdown many corporate entities would not able to post significant profits or declare substantial losses for the year.

    Merchant further said that the minimum tax applied on turnover when a taxpayer declare lower profit or declare gross losses to the year.

    The FPCCI in its proposals for fiscal year 2020/2021 said that the existing rate of 1.5 percent minimum tax is very high and results in financial hardships to the taxpayers.

    Due to the current economic conditions and its negative impact on productivity, the businesses are not operating at optimum level.

    According to changes vide Finance Act, 2016 threshold of turnover for individual and AOP for turnover tax at the rate of 1.25 percent decreased from Rs50 million to Rs10 million. This had adversely affected the true declaration of turnover and has created hardship for the taxpayers.

    After changes made in Section 113(1) of Income Tax Ordinance, 2001, now companies have to pay turnover tax even in case of gross loss before charging of depreciation. This has adversely affected the industry.

    Under section 113(2) (C) where Minimum Tax paid under sub section (1) exceeds the actual tax payable under Part I, Clause (1) of Division I, or Division II of the first Schedule, the excess amount is carried forward for adjustment against tax liability of the subsequent tax year(s).

    The FPCCI also proposed to reduce the minimum tax rate and enhance the limit of turnover to Rs50 million.

  • Time limit for customs valuation issuance should be fixed

    Time limit for customs valuation issuance should be fixed

    KARACHI: Federal Board of Revenue (FBR) has been recommended to fix time limit for issuance of customs valuation.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, said that the validity of Valuation Ruling under Section, 25-A of the Customs Act, 1969 is life time utill or unless revised or rescinded by the competent authority and Genuine Importer suffer as the Assessing Offices reject the transaction Values and Increase the Values of Assessments.

    Time limit may be fixed for issuance of Valuation Ruling under subsection 1 of section 25A of Custom Act, 1969, may not be more than 30 days and validity period under subsection 4 of section 25A of the Act should not be more than 90 or 120 days as we have fast internet system in the world over.

    (i) The following proviso may be inserted after subsection 1 of section 25A of the ACT,1969.

    “Provided that the time limit to notify the customs values under subsection 1 of section 25A should not me more than 30 days from date of first initiative of the subject exercise”.

    (ii) The words after the “applicable” in subsection 4 of section 25A should be substituted as; “till ninety days from the date of issuance of determined customs values.”

  • FPCCI says lowering interest rate by one percent not to help economy

    FPCCI says lowering interest rate by one percent not to help economy

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday said that the decision to lower interest rate by one percent will not help the country to boost especially considering adverse impact of coronavirus.

    FPCCI president Mian Anjum Nisar while responding to rate cut by State Bank of Pakistan (SBP) and said that despite clear message by all segments of economy particularly trade and industry the SBP reduction of one percent policy rate is surprising and unfavorable to bleeding economy.

    He said that given the current deteriorating economic situation all the Central Banks are supporting by significant reduction in interest rate along with stimulus packages while current decision not based on forward-looking inflation.

    He further stated that the FPCCI deplores the regulator’s conservative stance where the speed and the magnitude of the response do not match the havoc caused by the virus.

    FPCCI completely agrees with the external account situation detailed in their monetary policy statement where current account deficit (CAD) will remain in control as was the case in April.

    He said that May and June imports will be even lower than 3 billion per month on account of fewer orders placed by importers due to depressed demand under lockdown.

    Nisar further said since the external situation is in manageable as per SBP, there is sufficient information available on the inflation front to forecast a much lower rate than 7-9 percent forecasted for next year by SBP.

    Importantly, SBP in their 17th March, 2020 MPC press release stated: “Average headline inflation is expected to remain within the SBP’s 11-12 percent forecast in FY20, before falling to the medium-term target range of 5-7 somewhat earlier than previously forecast.”

    FPCCI based on its own research tends to agree with SBP’s earlier assessment of 5 percent anticipated inflation. We would have understood a cautious approach if the situation was normal but in these unprecedented times, we urge the regulator to appreciate the gravity of the situation where most businesses are expected to accrue markup when their sales are ZERO.

    The need of the hour is to take a more aggressive approach to policy making where what can be done tomorrow should be done today.

    FPCCI acknowledges the regulator’s approach on refining their decisions and policies based on constructive feedback as has been demonstrated in multiple improved iteration of various refinance schemes. In the same spirit, we stand ready to work closely with the regulator in our quest to bring down the rate to 5% in the shortest possible time.

    Mian Anjum Nisar President FPCCI urged the SBP to shift its pre-COVID-19 mindset and adopt the policies according to the sentiment of the Prime Minister Imran Khan and Businesses community to bring out economy from crises.

  • FPCCI recommends audit exemption for commercial importers

    FPCCI recommends audit exemption for commercial importers

    KARACHI – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called on the government to reinstate audit immunity for commercial importers in the upcoming federal budget 2020–2021.

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  • FPCCI demands 400 basis points cut in policy rate

    FPCCI demands 400 basis points cut in policy rate

    KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Thursday demanded the central bank to cut the policy rate by 400 basis points to five percent.

    The State Bank of Pakistan (SBP) is scheduled to release monetary policy statement on Friday May 15, 2020. The central bank in past two months reduced the policy rate by 4.25 percent to present 9 percent.

    FPCCI President Mian Anjum Nisar in a statement said that the State Bank of Pakistan (SBP) should bring down the interest rate to 5 percent.

    He said that the future anticipated expected inflation will further decline due to low demand and other effects of lockdown to control over spread of coronavirus.

    On the other hand external front is also presently sustainable due to foreign financial support and rescheduling of debt that has supported reduction in current account deficit.

    The FPCCI chief further stated that with both demand driven and import based inflation in check there is no reason to gradually bring down the interest rates when the case for immediate relief is apparent.

    He said economy of Pakistan is already hit very hard as business activities remain stop while they are paying 12 percent banks markup and cannot survive on such high KIBOR rate.

    There is 4-5 percent interest rate in Pakistan immediate regional competitors China, India Bangladesh.

    The SBP should also advice banks to revise KIBOR on a monthly basis instead of quarterly to pass on the benefit of lower rates faster to companies struggling to survive.

    The impact to banks on their deposits will be insignificant as majority is demand deposits instead of time deposits.

    Therefore, SBP lower interest rate to 5 percent in one go that is immediately reduction of 400 basis points rather lower in stages.

    He said that tough situations under COVID-19 demand support while conditions rationally suggest lowing of policy rate directly to 5 percent.

    While appreciating SBP role in sustaining economic growth through supporting trade and industry, Anjum Nisar emphasized upon financial relief by reduction in the interest rate.

    He said State bank should take measures and develop strategy to protect the pace of economic and trade progress of Pakistan Other- wise we will again face economic crises, lower industrial growth and shifting of industrial units in sick industry.

  • Uniform tax rate suggested on rental income

    Uniform tax rate suggested on rental income

    KARACHI: The tax rate on rental income should be made uniform for individual, Association of Persons (AOPs) and company at 15 percent.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, recommended to bring uniformity in taxing the rental income.

    The FPCCI said that at present for every person except companies the income from property is chargeable to tax at the rate specified in Division (VIA) of Part I of the First Schedule to the Ordinance, which is considered to be their final tax liability and they are not allowed any expenditure against gross rent, except option provided under sub-section (7) of section 15A of the Ordinance, in case income exceeds Rs.4 Million. Whereas, the companies are required to pay normal tax (current at 29 percent) on such income after adjustment of admissible expenditure out of gross rent.

    The tax rate on rental income has now been gradually increased from 20 percent to 35 percent for individuals and AOPs though the Finance Act, 2019.

    Apart from that the lessor is also required to pay Sindh Sales Tax at the rate of 3 percent to Sindh Revenue Board (SRB), which makes the total tax impact very unfair and exorbitant and lead towards un-documented business.

    The present scheme of taxation on rental income resulted the rents of warehouses had increased exorbitantly and the exporters who warehoused their exportable goods are financially hurt.

    Moreover, it has also distorted the income of the senior citizens, retired persons, pensioners, widows etc., whose livelihood solely depends upon rent of their property, made from their income in good old days.

    The FPCCI made following proposals:

    i) The rental income from property, AOP or individual and company be taxed at a uniform rate of 15% of the Gross Rent as full and final discharge of tax liability.

    ii) Rental income taxable under Normal Tax Regime should be allowed to be adjusted against business loss. The restriction imposed through Finance Act, 2013 needs to be reconsidered.

    Giving the rationales to the proposals, the FPCCI said:

    i) The impact of taxes (direct and indirect) on rental income will be rationalized.

    ii) Investors will be encouraged to declare their genuine rental income.

  • FBR suggested to abolish tax refund culture

    FBR suggested to abolish tax refund culture

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish tax refund culture and bring down sales tax at five percent.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021 suggested that the culture of refunds should be abolished and government should collect GST at the rate of 5 percent.

    “It will transfer the benefits to the end consumers which lead the control over inflation and poverty and enhancement in economic activities,” the FPCCI said.

    The apex trade body said that the reduction in the rate of sales tax will enlarge the size of consumer markets and government earnings will definitely increase.

    It will transfer the benefits to the end consumers which lead the control over inflation and poverty and enhancement in economic activities.

    The FPCCI highlighted the present structure of taxation policies in Pakistan.

    Here, it is noteworthy that inducement of private investment particularly foreign direct investment is the only feasible option to develop the badly deteriorated infrastructure in Pakistan.

    Greenfield investment and capitalization of the savings of expatriate Pakistanis are also included in this program.

    FPCCI proposed fiscal policy, while revival strategy will be based on foreign investment. It is unfortunate that tax rates in Pakistan are considered as major hurdle in investment.

    Tax and contribution as percentage of Gross profit is 33.9 percent in Pakistan, while it is 49.7 percent in India, 38.7 percent in Malaysia, 36.6 percent in USA, and 33.4 percent in Bangladesh.

    The average tax rate on corporate sector in Pakistan is 29 percent; it is 25 percent in India, 24 percent in Malaysia, and 21 percent in USA.

    It is important to note that tax system in Pakistan emphasizes on indirect taxes and surcharges. The share of direct taxes in government revenue is around 37 percent in Pakistan, 47 percent in India, 46 percent in Malaysia, 38 percent in UK and 50 percent only in USA.

    The lower share of direct taxes is because of exemptions and less e orts for tax collections from agriculture, services, real estates and retail trading activities.

    This situation leads to dependency on indirect taxes. The indirect taxes hampered the industry in many ways: they increase the cost of production and reduce the demand for manufacturing products, because of higher market prices of those products by inclusion of sales tax. By such a manner, they damage the industrial competitiveness and induce the inflation in economy.

    The FPCCI has recommended the shifting of dependency from indirect to direct taxes. We strongly recommend the reduction rate of sales tax to provide relief to the general public.

    This step will improve the buying power of general public and will help the industry in revival process and accelerate the investment in the country.

    It is extremely important for the survival of Pakistan economy at this stage. The reduction in the rate of GST is proposed on the basis of expected enhancement in revenue because of enhanced economic activities.

    To increase its revenue government should not depend on indirect taxation. This approach leads the poverty and inflation. We should encourage revenue enhancement through direct taxation on equity and egalitarian basis.

    Tax should be paid according to the magnitude of earning regardless the source of earning.

    To accelerate economic activities and improving efficiencies, the FPCCI suggests reduction in the rate of GST.

    This is the pivotal point of our taxation policy. A solution of containing the ongoing unsettled business environment is imperative. The present ongoing conflicts and contradictions has reduced the sales and as well as have chocked the sales points and agents of sales. The re-initiation efforts of FPCCI towards saleable policy objective of fixed sales system may find a substitute of settlement of ongoing disputed business environment.

    The reduction in the rate of sales tax will enlarge the size of consumer markets and government earnings will definitely increase. The sources of FBR have been indicating the effective tax rate of GST is less than 5 percent, which indicate that 71 percent of total collection of sales tax has to pay back in account of input adjustment and refund claims.

    The FPCCI in 2014 took-up a subject of fixed sales tax regime, which attended the influence level and even the then Finance Minister conceded to consider the same during his tenor as the document, submitted by FPCCI, concluded towards the objective that the collection would increase and not decrease by promoting business conducting environment through fixed sales tax regime.

    This will provide demand supported production environment for manufacturing. It will improve the collections and settle the disputed business environment.

  • FPCCI suggests measures to boost exports

    FPCCI suggests measures to boost exports

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested measures to boost exports of the country.

    The apex trade body in its proposals for budget 2020/2021 suggested measures to improve exports.

    The FPCCI said that if the proposals are implemented that those would create domestic demand suppression to promote investment– both local and foreign in exporting sector.

    The apex trade body suggested following measures to improve exports:

    i. Pakistan should formulate strategies to decrease dependence on traditional exports like textiles, leather, carpet, sports goods, stainless steel, surgical goods rice etc. There needs a shift in the composition of its exports that means promoting exports of high/ medium technology products whose participation in the world trade is increasing.

    ii. Either Zero rated or on reduced rate (say) 6 percent or 9 percent should be allowed on all inputs of five export sectors including the Packaging materials or refunds claims be paid within the stipulated time period.

    iii. To make Pakistan’s exports competitive in the international market, the exports be allowed 50 percent air freight subsidy from EDF.

    iv. Support from the government should be provided to establish Showrooms and warehouses and exhibition areas in mega departmental stores.

    v. Warehouses be established at borders of neighboring countries.

    vi. Land routes to the neighboring countries (Iran & Afghanistan) should be strictly controlled to stop smuggling.

    vii. The prevailing non-tariff barriers have restrained the volume of Pakistan’s exports to China and EU. Pakistani exporters are facing non-tariff barriers in safety and quality standards under the sanitary and phytosanitary (SPS) agreement. Sanitary and phytosanitary measures apply to trading commodities.

    viii. The importance of research cannot be neglected in today’s fast-changing world. Especially in high technology products, the need for research and development is to a greater extent. It will make the government more efficient in terms of production up-gradation and opportunities that arise from increasing technological export base. The relations between research institutions and the firms should be established and firmed.

    ix. All steps including increase in acreage under cotton crop, quality seed development and removal of weeds and eliminating of insects need to be adopted in this connection.

    x. To enhance the subsidized credit for exporters on higher interest rates.

    xi. To lower the imports tariff rates on the basis of cascading allowing effective protection rate to local industries – import substitution and export oriented – as per WTO agreement.

    xii. To enhance credit limit to SMEs to encourage the value chain of exports.

    xiii. There is a need of improving the export strategy to ensure sustainable growth and the role of fiscal responsibility to avoid recurrent external account crises.

    xiv. There is also a need of shifting from inward orientation to an outward looking economy as it puts a greater emphasis on exports to achieve high and sustainable growth. Moreover, different contours of an export oriented strategy that Pakistan should adopt in order to remain competitive in international market especially with regards to countries like India and Bangladesh.

    xv. Pakistan needs to penetrate the global synthetic products market which have overtaken cotton as synthetic / MMF, particularly polyester fibre (PSF) has substantially replaced cotton based fibre production. But Pakistan still lag behind MMF based production as a result is limiting itself to only some products.

  • FPCCI suggests measures to broaden tax base, improving tax to GDP ratio

    FPCCI suggests measures to broaden tax base, improving tax to GDP ratio

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested measures to broaden tax base and improving tax to GDP ratio.

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  • FBR extends time limit for filing goods declaration

    FBR extends time limit for filing goods declaration

    KARACHI: Federal Board of Revenue (FBR) has extended time limit for filing goods declaration in order to facilitate trade considering problems faced during lockdown.

    The FBR on Monday issued a notification for extension in time limit for filing of goods declaration. The FBR said that it had further extended the time for filing of goods declaration for all IGMs filed between April 07, 2020 to May 09, 2020 provided that this order shall not be applicable in case any fine or penalty had already been paid by the importers.

    Earlier, Khurram Ijaz, Vice President, Federation of pakistan Chambers of Commerce and Industry (FPCCI) on May 02, 2020 requested the FBR for further extension in time limit for filing of goods declaration.

    Khurram Ijaz in his communication with the FBR appriciated the revenue board for extending the time for filing of goods declaration from 10 days of arrival of goods to further 15 days (total 25 days) for all IGMDs filed between March 17, 2020 and April 07, 2020.

    However, the FPCCI vice president apprised the FBR that continued extension in lockdown by the government causing delay in timely filing of goods declaration, hence opportunity provided the revenue board should be extended up to the current lockdown till May 09, 2020.