KARACHI: Federal Board of Revenue (FBR) has been urged to trace unregistered persons instead collecting three percent further sales tax on local supplies.
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Bilingual one-page income tax return form advised
KARACHI: Federal Board of Revenue (FBR) has been advised to make one-page simple income tax return form and that should be available in Urdu and English to facilitate taxpayers.
In its proposals for budget 2020/2021, the Karachi Chamber of Commerce and Industry (KCCI) said that every year changes are made in income tax form and ironically, it becomes more confusing and difficult for the tax-payers to fill.
It is particularly cumbersome for the Small and Medium Enterprises (SMEs) including individuals and Association of Persons (AOPs).
The KCCI said that taxpayers have to seek assistance from consultants and pay large amount of fee only to comply with the requirements of tax return.
Due to the changes every year, tax-payers have to wait for the new form to be issued by the FBR which takes a month or two after the new budget is approved.
“The complicated form only helps the business of consultants and tax practitioners at the expense of compliant taxpayers,” the KCCI said.
It is one of the reasons that many individuals prefer to stay out of tax regime and a deterrent to broadening of tax base.
The Karachi Chamber proposed that separate income tax return forms for companies, AOPs, individuals and salaried class should be created.
Forms for SMEs and individuals and retailers should be a simple one page form both in English and Urdu.
Manual completion and filing should be allowed for individuals and SMEs in order to encourage documentation.
Extreme penalties and charges should be avoided in case of late filing.
Errors/short payment should be notified to registered person within two months of filing and correction of errors should be allowed to tax-filer for up to 3 months of filing without requirement of commissioner’s approval.
The chamber said that incorporation of proposal will help in simplification of filing procedures and documentation. Besides it will also help in broadening of tax base and increase in number of filers.
Further, it will save unnecessary expenses on fees of consultants and tax practitioners. It will eliminate corruption and harassment.
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All income tax audit selections should bring under one provision
KARACHI: Federal Board of Revenue (FBR) has been urged to eliminate audit selection under various provisions of Income Tax Ordinance, 2001 for the confidence building of taxpayers.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, said that presently audit proceedings can be started u/s 177 as well as through balloting u/s 214C and like-wise enquiries can also be made by the Commissioner u/s 122(5A).
There is a concept of a special audit panel u/s 177(11) as well.
Sub-Section 7 is ambiguous and provides the Commissioner and his sub ordinates with a tool to harass, extort and victimize any taxpayer at will.
The Commissioner can reopen the audit of any person or firm at will on unsubstantiated grounds.
Under sub-Section 4 of Section 177, any person employed by a firm to conduct audit function may be authorized by the Commissioner to exercise powers under sections 175 and section 176.
The chamber said that the revenue collection through such recovery proceedings is hardly Rs.92 billion whereas the costs due to litigation, involvement of entire tax collection machinery and declining number of tax filers, is far more than the collection.
Multiple Audits under various provisions have eroded the trust of tax-payers in the FBR. RTOs and LTUs. Audit functions under various provisions have created confusion and complexity in tax regime.
Such provisions are also prone to misuse and a source of harassment.
The KCCI proposed that all Audit functions should be brought under one provision of Income Tax Ordinance rather than various over-lapping provisions with clear and well defined parameters.
Audit Parameters should be transparent and open to taxpayers.
Further, Sub-Section 7 may be deleted.
Powers of the Commissioner and sub-ordinate officials should be curtailed to restore the trust of taxpayers and encourage broadening of tax-base.
Such Audits should be restricted to specific queries or objections and call for relevant document only rather than opening and re-opening a comprehensive audit every time.
The chamber said that it will bring transparency and clarity to Audit functions and rules governing the same.
Prevent harassment to tax payers and abuse of powers by Inland Revenue officials. Broaden tax base by restoring confidence in the system.
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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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FBR recommended CNIC condition on sale of above 10 tola gold
KARACHI: Federal Board of Revenue (FBR) has been urged to fix the condition of Computerized National Identity Card (CNIC) on purchase of around 10 Tola or above of gold.
Karachi Chamber of Commerce and Industry (KCCI) in proposals for budget 2020/2021 submitted to FBR, said that during last two years, prices of gold has sharply increased and the amount of Rs.50,000 is quite irrational and unfair due to high value of precious metal.
Only 7 grams gold jeweler will cost more than Rs.50,000, the KCCI said.
Highlighting the impact, the KCCI said that the customers will deal directly with unorganized sector / workshops
– Mostly undocumented jewelers benefit from requirement of CNIC for purchases above Rs.50000/-
– Will encourage under reporting of transactions
– Will result in loss of taxes to government
The chamber therefore proposed that the issue may been seen realistically and condition of NIC be imposed on purchase of 10 tolas or more.
It will boost official business activities and will also generate and promote economic activities besides generating revenue for the government as well.
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FBR advised to withdraw powers of freezing bank accounts for tax recovery
KARACHI: Federal Board of Revenue (FBR) has been advised to withdraw powers of tax officials related to freezing bank accounts for tax recovery.
Karachi Chamber of Commerce and Industry (KCCI) in its budget proposals for 2020/2021 submitted to the FBR highlighted provisions of Income Tax Ordinance, 2001 regarding accessing bank accounts for tax recovery.
Under Section 140 of the Income Tax Ordinance, 2001 which deals with recovery of tax from persons holding money on behalf of a taxpayer.
— (1) For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –
(a) owing or who may owe money to the taxpayer; or
(b) holding or who may hold money for, or on account of the taxpayer.
This provision and further access to information on a bank accounts under other provisions of law, have been counterproductive and led to a flourishing cash economy, the KCCI said.
It said that there were many innovative ways been evolved by businesses similar to the blockchain and local hundi system.
Such provisions only affect the registered businesses while the entire unregistered sector is immune from such laws and a coercive approach.
Banks are also suffering with decline in deposits and transactions which used to be conducted through the system. It is evident from a slowdown in economic activities, the chamber said.
It is better to do way with such anti-growth and anti-business policies and laws. Powers to access the bank accounts of registered persons and to freeze account should be withdrawn through Finance Bill 2020.
Access may only be limited to accounts of unregistered persons, but account may not be blocked or frozen.
Commissioner should only be authorized to obtain information about the funds in accounts and should be authorized to seek clarification as to the nature of transactions and sources of funds. Such persons may be brought into the tax-net.
The Karachi Chamber said that the proposed amendments would provide relief to the registered persons and restore confidence in banking system and would encourage official transactions.
Besides, it would help in bringing unregistered persons into the tax-regime.
Stimulate economic activities and growth. Increase bank deposits which may be used for lending to industry.
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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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Auto parts, motorcycles should be excluded from retail price printing condition
KARACHI: Federal Board of Revenue (FBR) has been urged to exclude auto spare parts and motorcycles from the requirement of printing of retail price.
Karachi Chamber of Commerce and Industry (KCCI) in proposals for budget 2020/2021 submitted to the FBR, said that due to inclusion of motorcycle and automobile spare parts in the Third Schedule, to the Sales Tax Act, 1990 vide new serial No.49 in column (1) through the Finance Act, 2019, serious hardship is being faced by importers of motorcycle and automobile spare parts.
Under the amended procedure, importers are required to print MRP (Maximum Retail Price) on the imported parts and pay sales tax and additional sales tax on customs value.
The chamber said that importers were unable to determine the landed cost at the time of delivery of cargo at destination due to the fluctuations in exchange rates.
“It is not possible to determine the sale price of imported auto parts at which the retailers will sell the same to end-users.”
There is wide variation in sale prices by wholesalers and retailers. Importers cannot pre-determine and declare maximum retail price as required under the new regulations.
Due to market fluctuations and rapidly changing demand and supply situation, importers cannot determine the final sale price and sales tax accordingly at import stage.
Frequent and unpredictable fluctuation in exchange rates make it impracticable to forecast the actual landed cost and sale prices, the chamber said.
The KCCI proposed that motorcycle and auto parts are not a consumer product /grocery item which may require MRP to be printed on the product. It is an industrial use product, supporting Pakistan’s auto industry and meeting the requirements of after-market.
“Therefore the automobile/motorcycle spare parts may be taken out of Third Schedule and included in normal tax regime for assessment of Customs Duty, Sales Tax and WHT etc.
Customs authorities have the competency to assess the values and levy the Custom Duty and Taxes accordingly.
The KCCI said that the proposed amendment would facilitate importers and dealers in customs clearance and avoid detention and demurrage charges.
Curtail rampant smuggling which has been on the rise after inclusion of Autoparts in Third Schedule.
Further it would support automobile industry and after market. Prevent delays in clearance and resulting costs.
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FBR suggested to abolish further sales tax on fulfilling CNIC condition
KARACHI: Federal Board of Revenue (FBR) has been proposed to abolish further sales tax in case taxpayers fulfil condition of Computerized National Identity Card (CNIC).
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