KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday said it will oppose any move to grant powers to tax officials regarding opening cases of past 10 years.
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Karachi Chamber seeks fair tax treatment for commercial importers
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has sought fair treatment on collection of withholding tax for commercial importers on import of industrial raw material.
KCCI in its budget proposals submitted to the Federal Board of Revenue (FBR), said that under Section 148(1) of Income Tax Ordinance, 2001, 6 percent withholding income tax is levied on import of industrial raw materials, whereas manufacturers are exempt from such withholding tax at import stage under Section 159 read with Rule 72B (PART IV OF SECOND SCHDULE OF Income Tax Ordinance, 2001).
The exemption has created disparity of 7 percent between commercial importers and manufacturers in total incidence of taxes (when 3 percent further tax are included).
This anomaly has led to rampant misuse and evasion of taxes through over-import by manufacturers for trading purpose, fake registrations by commercial importers and corruption in tax offices for issuance of exemption certificates U/S 159 (1).
The KCCI said that most of the commercial importers of Raw Materials have now registered as manufacturers to avoid high rate of WHT, 3 percent value addition tax and further tax of 3 percent.
Nearly 90 percent of all industrial raw material is now imported under the category of manufacturers, while the industry also imports raw materials for trading.
Loss of revenue is at over Rs.80 billion on total raw material import of Rs.3,250 billion in Pakistan.
The KCCI proposed that the rate of withholding tax on import of raw materials should be equal for both commercial importers and manufacturers and fixed at 3percent on import stage.
Further, exemption under Rule 72B (PART IV OF SECOND SCHDULE OF ITO) on raw materials imported by manufacturers should be withdrawn and disparity in WHT may be removed.
The rate of withholding tax on commercial importers is very high and should be reduced to 1.5 percent to qualify as minimum tax as is the case for industry and large import houses.
The chamber said that the measure will help broaden tax base, prevent misuse of exemption by fake registration as manufacturers.
Besides, this will help in substantial Increase in revenue collection through rationalization.
The KCCI said that the commercial importers of raw materials are a major support to SMEs and recover taxes on behalf of the government.
Therefore, rationalization will revive the commercial import, support SMEs and prevent misuse of exemption.
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KCCI proposes regularizing gold, jewellery sector
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has submitted proposals to tax authorities for regularizing gold and jewellery sector.
In its proposals for budget 2020/2021, the KCCI said that gold and Jewelry sector has always been a neglected and largely unregulated sector.
No clear policy on import of Gold and precious metals has been formulated while also the export of finished Jewelry has no incentives.
There is a massive demand and consumption of gold, silver and gems in Pakistan and annual consumption of gold is estimated at 160.0 metric tons.
The chamber said that the demand is met mostly by undocumented sector because the foreign exchange is not provided by State Bank of Pakistan for import of gold.
Clause under Serial.No.16 of Part II of Import Policy Order 2016, which deals with import of Gold and Silver, stipulates the condition ‘Importable subject to the condition that importer shall arrange his own foreign exchange for the purpose’.
But there is no provision under the Foreign Exchange Rules which provides the necessary procedure to allow the importers to arrange own foreign exchange and remit the same to the supplier.
This has resulted in smuggling and undocumented trade in Gold, and a major sector which has immense potential for exports and revenue generation is suffering with rapid decline.
Thousands of goldsmiths, artisans and workers have lost their jobs. This sector has the capacity to produce high quality gold ornaments and designer jewelry for export.
The Karachi Chamber proposed that the sector can be a major employer and source of revenue if appropriate policy governing import of precious metals, documentation of sales and rational tax rates are implemented in consultation with stake holders.
Import of Gold and Silver may be allowed against payment in foreign exchange arranged by importers through local market (exchange companies and banks). Necessary legislation may be promulgated to legalize the jewelry trade.
It will help in curtailing smuggling of gold, silver and gems. Further, jewelry trade will be documented because if the import is legalized then the subsequent entities in supply chain will be documented.
Besides, this will unleash the potential of a large sector to contribute in growth, employment of highly skilled workers and export of Jewelry.
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Regulatory duty must be rationalized to curb smuggling: Karachi Chamber
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has urged tax authorities to rationalize the regulatory duty on imported goods in order to curb smuggling.
In its proposals for budget 2020/2021, the KCCI said that the regulatory duty was imposed in last fiscal year to rectify the balance of payment crisis.
To some extent the regulatory duty on imported food items supported the food items produced locally but most of those items which are not produced locally due to climate and resources, have to be imported.
High rates of RD on imported food items has sharply increased cost of import and consequently these items have been pushed into smuggling regime.
“Rampant smuggling of these items is taking place with impunity making it impossible to import through documented channels.”
The KCCI Major loss of revenue to exchequer because smuggling mafia makes everything available without paying any taxes and duties.
Imposition of regulatory duty is the main cause that such commonly used items like dry-fruits, nutrition, honey, grains, pulses and spices are being imported through illegal channels which is causing significant damage to the economy of the country.
The KCCI suggested that regulatory duties should be rationalized and in some cases withdrawn to curtail smuggling and help to increase in revenues, documentation of trade and support the exports as many of the imported items are industrial raw materials which are re-exported to generate foreign exchange for Pakistan.
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KCCI wants end lockdown, deploy army for SOP enforcement
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday urged the government to lift lockdown completely and allow all type of businesses to restart their activities.
Siraj Kassam Teli, Chairman Businessmen Group (BMG) and former KCCI president in a statement also advised the government to deploy troops from the army whose presence and patrolling at various commercial markets would ensure strict adherence to the Standard Operating Procedures (SOPs) devised to contain further spread of coronavirus pandemic.
Teli said that Pakistan’s economy was already in deep crises and the country cannot afford further damages hence, it was really critical to restart all businesses with normal timings and get back to routine life in presence of the virus.
“On one hand, we have to contain coronavirus pandemic but on the other, we also have to save the already ailing economy therefore, the patriotic and disciplined troops from armed forces must be given the task to ensure across the board implementation of SOPs, which has to be done on top priority in order to save the economy from plunging into further crises,” he said, adding that reopening of businesses under army’s supervision would help in protecting the businesses from complete collapse and save the masses from unemployment, poverty and starvation.
Chairman BMG, while referring to numerous measures adopted by the Federal and Provincial governments since the imposition of lockdown from March 23, said that the federal government and all provincial governments strived really hard to deal with COVID-19 pandemic and they all deserve to be appreciated but unfortunately, the number of people affected by coronavirus continues to rise all over the country as the public and also the members of the business community have been largely ignoring the SOPs due to lack of discipline.
“Pakistan army is well-known for its discipline all around the world hence, it is high time that the army must come forward to rescue the country, teach discipline to the masses and get the SOPs enforced all the time which is the only way to save our beloved motherland from further disaster,” he added.
He stressed that the coronavirus pandemic is not going anywhere and we have to live with it and continue our businesses in a disciplined manner.
“We cannot live in the lockdown forever so we have to exhibit the Discipline which is the first step on the road to success.”
He cautioned that if the lockdown is not suspended immediately, many businesses, which remain completely suspended since last more than two months, would shut down forever that would lead to creating a chaotic situation as the people would find no other option but to come out on streets to protest due to rising unemployment and poverty.
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Karachi Chamber urges shipping lines to waive detention charges
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has urged shipping lines to waive detention and other charges considering extraordinary situation due to coronavirus and lockdown.
To support the consignees in Pakistan during the ongoing difficult times, President KCCI Agha Shahab Ahmed Khan urged all shipping lines and their agents in Pakistan to give total waiver of detention charges and any penalties or charges under other heads on all consignments that landed from March 10, 2020 up to May 31. 2020.
In separate letters sent to All Pakistan Shipping Association and Pakistan Ships’ Agents Association, President KCCI pointed out that in the present extra-ordinary circumstances, the shipping lines and agents have a moral and ethical responsibility to extend relief to the consignees and waive the entire detention charges and any other penalties or charges on FCL and LCL consignments, to facilitate clearance and delivery of cargo to the consignees.
“It is important to mention that the Ministry of Maritime Affairs and KPT have also approved the waiver of port demurrage and allowed additional 10 days of free storage for the imported cargoes. But unfortunately due to accumulated detention charges importers are unable to clear their containers,” he added.
He said that due to the lockdown during the months of March and April 2020 imposed by the government to prevent the spread of coronavirus pandemic, many importers have not been able to clear the import cargoes within the stipulated free detention period allowed.
Consequently, very large amounts of detention charges and penalties have accumulated which the consignees are unable to pay, while also a large number of containers have piled up at the ports.
He informed that during the last few weeks, KCCI received a large number of representations from trade and industry which are facing heavy losses due to the exorbitant container detention charges by including shipping agents and representatives of shipping lines.
The losses are over and above those caused by a sharp decline in prices of various commodities and products which have been imported by these consignees, thus making it impossible to pay for the heavy detention and other penal charges demanded by the shipping agents and their principals.
Many such entities have been pushed to a situation of Force Majeure.
Agha Shahab further noted with deep concern that the same shipping lines have voluntarily extended concessions and relief to their clients in India while they have refused to allow any concession to consignees based in Pakistan.
He was of the opinion that Pakistan’s shipping trade has been a lucrative source of income for shipping lines who have earned decent profits from this market for many years.
“It is time they support the consignees in a situation where the entire global economy is passing through an unprecedented crisis and all business entities in Pakistan are incurring heavy losses as a consequence of extra-ordinary circumstances,” he stressed.
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Karachi Chamber demands ease in lockdown, resuming trade activities
KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has urged the government to ease the ongoing lockdown and allow the resumption of trade activities.
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KCCI demands policy rate at 4 percent
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday demanded the central bank to reduce policy rate to 4 percent instead easing in bits and pieces.
KCCI President Agha Shahab Ahmed Khan in a statement urged the State Bank of Pakistan (SBP) to bring down the policy rate from 9.0 percent to 4.0 percent in view of the extra-ordinary circumstances and a global scale economic crisis, which is certain to have a long term negative impact on Pakistan’s economy.
In a letter sent to Governor SBP Dr. Reza Baqir, President KCCI stressed that reduction in policy rate in bits and pieces is not enough to provide the much needed stimulus to the economy hence, it is necessary to significantly reduce the interest rate in a single step, to help the businesses sail through the unprecedented crisis.
He was of the opinion that there is now ample justification for reduction in policy rate because the inflation rate has declined sharply due to a steep fall in prices of crude oil, commodities and raw materials, while the demand has also been suppressed.
President KCCI appreciated the measures taken by SBP to support the industry and exporters to meet the challenges and financial crunch faced by them due to prolonged lockdowns to prevent the spread of Covid-19 coronavirus.
While acknowledging the interest rates of 4 percent and 5 percent for filers and non-filers respectively in the package, he suggested that in view of the special circumstances, the rate of interest should be zero to support the economy and sustain the industries at least for the next one year.
He however stressed that there is a dire need to announce a Rescue Package for Micro level Enterprises and SMEs which contribute around 40 percent to GDP.
He pointed out that unfortunately, no relief has so far been announced for Micro enterprises and SMEs, which are under much greater financial stress then the large scale businesses and their survival is at stake.
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Karachi Chamber advocates unregistered transactions
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) reiterated demand for eliminating condition of Computerized National Identity Card (CNIC) and allow unregistered persons to make purchases freely.
KCCI President Agha Shahab Ahmed Khan in a statement on Monday urged the government to immediately waive CNIC requirement for sales to unregistered persons and three percent further tax in order to revive the economic activities and business transactions.
In a letter sent to PM’s Advisor on Finance & Revenue Dr. Abdul Hafeez Shaikh, President KCCI said that waiver of CNIC condition and 3 percent Further Tax would result in release of major stockpiles of commodities and consumer goods into the markets and revenue collection will improve through liberalization of transactions.
“Small and Medium Industry will also benefit as a result of such measure because a very large volume of raw materials is supplied to SMEs by commercial importers who are stuck with inventories. In order to stimulate the economy, an across the board relief is required rather than selective assistance to already favored sectors,” he added.
President KCCI pointed out that in the Finance Act 2019, an amendment was made to Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, by addition of 10th Schedule, whereby it is mandatory to provide CNIC number of unregistered buyers in the invoice and Sales Tax Returns in addition to payment of 3 percent Further Tax. Similar statute has been added U/S.19A of Federal Excise Act, Sec.216A to Income Tax Ordinance and Sec.156A of Customs Act.
He noted that since the number of registered persons in Sales Tax regime stood hardly at around 45,000 all over Pakistan, it is not possible for suppliers/ sellers and manufacturers to provide the CNIC of buyers on account of all their sales. This condition has resulted in a slowdown of business transactions and proliferation of cash economy.
Agha Shahab said that the situation has further aggravated due to country-wide lockdown and disruption in supply chain due to the outbreak of coronavirus. Consequently, stocks and inventories with importers, manufacturers and wholesalers are accumulating while recoveries from markets have completely stopped and a large number of bank defaults are likely to take place due to liquidity crunch.
Unfortunately, while giving major relief to export sectors which hardly contributes 5 to 6 percent to GDP, the government has entirely ignored the larger sectors of industry and trade catering to domestic markets and contributing 94 percent to GDP and major part of tax revenue, he said, adding that it will prove to be detrimental for revenue collection by the FBR if the business transactions remain stalled while the government would surely miss the revenue targets and incur larger fiscal deficit as a result of imposition of CNIC provisions and 3 percent further tax.
“Hence, as a relief measure, the requirement of CNIC for sales to unregistered persons and 3 percent Further Tax has to be waived immediately in order to revive the economic activities and business transactions”, Agha Shahab stressed.
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Tax incentives for all sectors demanded; letter sent to PM
KARACHI: Business community has urged the government to grant tax relief package for all sectors of the economy in order to dilute the adverse effect of coronavirus.
Agha Shahab Ahmed Khan, President, Karachi Chamber of Commerce & Industry (KCCI) while emphasizing the need to consider out of the box solutions, urged the government to formulate an across-the-board incentive package encompassing all the sectors of trade and industry in order to stimulate the economy so as to minimize the impact of global recession and prevent massive unemployment in Pakistan.
In a letter sent to Prime Minister Imran Khan, Agha Shahab gave numerous recommendations for the proposed across-the-board incentive package in which General Sales Tax (GST) rates should be reduced from 17 percent to 9 percent while Withholding Tax (WHT) on all supplies by manufacturers and traders must also be brought down from the current 4.5 percent to 2 percent and the anomaly in WHT rates on import of raw materials by industry and commercial importers has to be removed and a uniform rate of withholding tax should be applicable on both to support the Small & Medium Enterprises (SMEs).
He said that most importantly the discretionary powers under Section 140 of Income Tax Ordinance to access the bank accounts of registered persons be withdrawn, in order to restore confidence of investors and encourage transactions through banking system.
He recommended that the policy rate has to be reduced to 7 percent in line with other countries to stimulate the economy whereas the deferred import bills which are due for payment through banks should be refinanced at 5 percent mark-up.
President KCCI also recommended no questions should be asked for all investments in capital goods, raw materials, premises, acquisition of land and building for industry and trade up to June 30, 2022.
He noted that many other countries have taken initiatives to support their economies and announced incentive packages worth trillions of dollars to bail out the businesses which are going to suffer due to o recession triggered by COVID-19 pandemic.
“Even the Bangladeshi government has announced an across the board relief package of $8.6 billion which includes significant support to SMEs.”
He pointed out that the black economy in Pakistan is twice the size of documented economy and due to the present coercive tax regime and laws, a very large amount of capital is blocked in idle investments.
In view of the prevailing global economic crisis and its negative impact on Pakistan, it is essential to release the blocked capital and encourage investments into productive economic activities such as industry and trade.
Appreciating the Special Incentive Package for Construction Industry, President KCCI, however, said that the benefits of concessions granted to one or two specific sectors will neither reach the majority of trade and industry nor provide relief to common man.
In the present extra-ordinary circumstances, it is necessary to provide across the board incentive package for investment in all sectors of trade and industry, and the SMEs which have a major contribution to GDP and Tax revenues, he added.
It is a critical and challenging time for the country and its economy, therefore the government has to remove the bureaucratic shackles and handicaps created by a very complex tax system, to unleash the entrepreneurial capacity of business community.