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Tag: KTBA

  • KTBA presents tax proposals for salary income

    KTBA presents tax proposals for salary income

    KARACHI: The Karachi Tax Bar Association (KTBA) has presented income tax proposals for salary income for incorporating in the Finance Bill 2021.

    In its proposals for budget 2021/2022, the tax bar highlighted the issue related to taxation of notional income.

    It said that the difference between the benchmark rate and the actual rate of interest is charged where actual rate of interest is charged at less than the benchmark rate by the employers on concessionary loans provided to the employees or otherwise it is treated as perquisite chargeable to tax

    The tax bar said 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.

    The KTBA proposed that the taxation of marginal income on loans obtained from the employer below benchmark rate should be exempted for lower threshold amounts. The minimum threshold of the loan amount on which the provisions of Section 13(7) of Income Tax Ordinance, 2001 may not apply should be raised to at least Rs.2,500,000/- from the existing limit of Rs.1,000,000/-.

    It is further suggested that benchmark rate currently fixed at ten percent be based on Kibor rate.

    Giving rationale to the proposal, the KTBA said that the change would result in facilitation and easement of salaried taxpayers.

    The tax bar highlighted the issue of withholding tax on salary income.

    It said as per section 149 of the Income Tax Ordinance, 2001, every person paying salary to employee shall deduct tax from the amount paid at specified rate after making tax adjustment of tax credit U/s. 61, 62 ,63 and 64 of the Ordinance and other adjustments.

    Complete tax credits though legally available are not adjusted in payroll run.

    The KTBA proposed that this section should include all tax credit under Part X Chapter III as are admissible against salary income.

    Giving rationale to the proposal, the KTBA said that the current scheme has apparently missed tax credit under section 62A of the Income Tax Ordinance, 2001. The proposed amendment would cater all the current credits and those to be introduced from time to time.

    The KTBA also highlighted the issue of employer contribution to Provident Fund.

    It said Under Clause (3), Part I, Sixth Schedule of the Ordinance, the employer’s contribution in the recognized provident fund in excess of Rs.150,000 (increased from Rs.100,000 by Finance Act, 2016) is deemed to be income of the employee.

    This provision is invalid as the accumulated balance (it includes employer’s contribution) due and becoming payable to an employee participating in a recognized provident fund is totally exempt from tax under Clause (23), Part I, Second Schedule.

    Without prejudice to foregoing, since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution.

    The tax bar proposed that Clause (3) Part 1, Sixth Schedule be amended to exempt employer contribution to bring it at par with clause (23) Part 1, Second Schedule.

    Alternatively, the threshold be based as Rs 150,000 or 1/10th of the salary whichever is higher.

    Giving rationale to the proposal, the KTBA said that since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution.

    To another proposal, the KTBA said that as per clause (13)(iv) of part – I, there is existing limit of Rs.75,000/-.

    Gratuity exemption not indexed for inflation, it added.

    It should be increased to Rs.300,000/-, the KTBA proposed.

    Considering the inflationary effect since the current limit as set at the promulgation of Ordinance has remained unchanged.

    Similarly, the KTBA highlighted that as per clause (23A), withdrawal of 50 percent of balance is exempted subject to fulfillment of conditions.

    It said that it was an inadequate exemption.

    It is proposed to increase the exemption to the extent of withdrawal of actual amount invested in the pension fund and additional amount to be taxed at the rate of tax applicable on salaries.

    To exempt the portion of investment made in pension funds.

  • KTBA recommends abolishing alternative corporate tax

    KTBA recommends abolishing alternative corporate tax

    KARACHI: Tax practitioners have recommended to abolish alternative corporate tax (ACT) in the budget 2021/2022 as the levy is increasing cost of doing business.

    The tax bar in its proposals for the upcoming budget 2021/2022 recommended to abolish the ACT.

    As per section 113C of the Income Tax Ordinance, 2001, tax payable by company subject to tax under Division-II Part-I of 1st Schedule or minimum tax shall be higher of corporate tax or ACT.

    The tax bar said that it was increasing cost of doing business and regressive taxation.

    Therefore, the KTBA proposed that ACT Should be abolished.

    There is already a minimum tax regime which imposes tax on the gross turnover U/s. 113, alongside minimum tax regime for supplies, services, under various section of the Ordinance and hence ACT is only increasing  the complexity of the computations.

    Besides, the KTBA has also recommended to reduce the minimum tax rate.

    Currently rate of minimum tax is 1.5% of the turnover. The threshold for turnover in case of individuals and AOPs was decrease from Rs50 million to Rs10 million by the Finance Act, 2016.

    It resulted in increased cost of doing business and regressive taxation.

    The KTBA proposed that minimum tax on listed companies should be abolished and in case of other cases the rate of minimum tax should be gradually reduced by 0.2 percent annually so that by tax year 2025 the rate shall be reduced up to 0.5 percent. The threshold of turnover should be increase to Rs50 million.

    Moreover, minimum tax should also be allowed to be carried forward for adjustment in subsequent year even in case of losses.

    The receipts now brought under Minimum Tax (from Final Tax Regime) should be exempted from this minimum tax.

    Removal of minimum tax will promote industrialization. Decrease in turnover threshold will result the true declaration of turnover and created hardship for taxpayers, the tax bar added.

  • FBR urged to reintroduce income tax credit on registered sales

    FBR urged to reintroduce income tax credit on registered sales

    KARACHI: Federal Board of Revenue (FBR) has been urged to reintroduce income tax credit on registered sales in order to provide incentive to documentation of economy and increase the tax base.

    Karachi Tax Bar Association (KTBA) in its recommendations for budget 2021/2022 submitted to the FBR proposed the reintroduction of tax credit on registered sales.

    The KTBA said that the tax credit would provide incentive for documentation of economy and increase of the tax base a tax credit of 2.5 percent of tax liability was offered to manufacturers given in the year 2009 making 90 percent of their sales to persons registered under the Sales Tax Law.

    The tax credit was increased to 3 percent by Finance Act, 2016. However, this Tax credit was deleted by Finance Act, 2017.

    Years of efforts to document the economy has been pushed backwards and that too without any warning and rationale.

    The KTBA said that the tax credit should be re-introduced. Further this tax credit on 90 percent sales should be extended to persons making 90 percent of purchases from persons registered under the Sales Tax Act, 1990 as well.

    It will encourage the much-desired documentation of the economy.

  • KTBA presents proposals for budget 2021/2022

    KTBA presents proposals for budget 2021/2022

    KARACHI: Karachi Tax Bar Association (KTBA) on Tuesday presented proposals for budget 2021/2022 to the Federal Board of Revenue (FBR).

    In its proposals the KTBA said that the tax-to-GDP ratio was a soaring issue for country’s economic managers. “On the other hand, tax measures undertaken in Pakistan have traditionally created higher taxation on formal economy and under taxation on information economy,” it added.

    Primarily, it is because of over dependence over withholding tax regime as well as due to higher tax expenditure and concessions/exemptions.

    In addition to above many studies have concluded that there are gap in agriculture and property income in Pakistan which otherwise are under-taxed hence misused.

    “Besides, there are distortions in collection of General Sales Tax on goods and services and full tax collection on this core is yet to be exploited,” it added.

    In addition to above, a host of tax exemption/concessions have already been withdrawn by way of Tax Laws (Second) Amendment Ordinance, 2021 which was believe will become part of budget proposals.

    It is however the country needs a lot more drastic measures to bring its tax to GDP ratio at desired level.

    The KTBA suggested that federal and provincial governments should harmonize their differences in order to remove the gaps and distortions and to improve tax collection from agricultural, property and GST.

    The tax bar said that the proposals were completed keeping in view following features and categories:

    — Salvaging the manufacturing sector

    — Proposal for salvaging the corporate sector

    — Taxation and withholding tax regime under Section 148 and 153 of Income Tax Ordinance, 2001.

    — Proposals regarding taxation of property income

    — Capital gains taxation on securities

    — Proposal for changes in taxation of salary income

    — Proposal for changes in taxation of non-residents

    — Proposal for change in Non-Profit Organizations

    — Withholding tax provisions

    — Proposal for Appellate proceeding

    — Proposal for departmental proceeding

    — Proposal for simplifying filing and other periodic compliance

    — Broadening the scope and equitable of the law.

  • Karachi Tax Bar suggests reduction in corporate tax rate

    Karachi Tax Bar suggests reduction in corporate tax rate

    KARACHI: Karachi Tax Bar Association (KTBA) on Tuesday suggested reduction of corporate tax rate to 25 percent from existing 29 percent in order to promote documentation of economy and discouraging tax evasion.

    The KTBA in its recommendations for the budget 2021/2022, stated that currently corporate rate of tax in Pakistan is 29 percent which due to Workers Welfare Fund (WWF) and Worker Welfare Participation Fund (WWPF) goes up to 36 percent which is higher than the average tax rate in Asia i.e. 21.32 percent.

    The higher corporate rate is increasing cost of doing business and regionally uncompetitive position.

    The KTBA proposed that the corporate rate of tax should be decrease up to 25 percent by gradually decreasing 1 percent every year.

    The rate of tax on small companies should also gradually be reduced to 15 percent.

    Income of WPPF should be exempted from tax. The excess of WPPF as deposited in WWF fund should be also as a credit against WWF levy.

    The KTBA said that the high rate of tax is encouraging tax evasion and discouraging documentation of economy and corporatization.

    It is also disincentive for foreign and local investment, it added.

  • IR offices issuing incorrect audit notices to avoid time limitation: KTBA

    IR offices issuing incorrect audit notices to avoid time limitation: KTBA

    KARACHI: The offices of Inland Revenue are issuing incorrect audit notices in order to avoid restriction of time limit as defined in the Income Tax Ordinance, 2001, tax practitioners alleged the tax authorities on Friday.

    The Karachi Tax Bar Association (KTBA) in a letter sent to Inland Revenue offices of Federal Board of Revenue (FBR) located in the metropolis strongly criticized the issuance of faulty audit notices for tax year 2015 in order to avoid time restrictions.

    The KTBA wrote letters to chief commissioners highlighting the haste of tax offices in issuing notices under section 122(5) of Income Tax Ordinance, 2001 during past two weeks just to comply with the time limit of initiating audit for tax year 2015.

    The tax bar shared following ‘reasons and grounds’ advanced by the field formation officers to assume resource of ‘definite information’.

    — Not declared any capital hence income declared under Normal Tax Regime (NTR) and Final Tax Regime (FTR) is out of undisclosed sources of capital whereby closing stock is likely to be added as unexplained income.

    — Accretion in wealth is more than income declared/claimed under NTR/FTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.

    — Personal expenditure bears a difference between income claimed under FTR and NTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.

    — Bank deposits and debit entries are huge which do not commensurate to be declared income version and difference is likely to be added as income from other source.

    — Foreign remittance claimed in the return needs to be probed for the purpose of compliance of Section 111(4) of the Income Tax Ordinance, 2001.

    — Capital gain on sale of securities and immovable properties claimed in the returns needs to be probed in line with Section 37(3A) and 37A of Income Tax Ordinance, 2001.

    — Gift (cash or kind) claimed needs to be probed for the purpose of Section 39 (3) of the Income Tax Ordinance, 2001.

    — Total liability in wealth has decreased from previous year which since a liability was definitely paid-off from unexplained source of income and liable to be treated as unexplained expenditure in line with Section 111 of Income Tax Ordinance, 2001.

    — Interestingly a number of such notices have also been issued where audits for the tax year 2015 have already been concluded.

    The KTBA said that notices had wrongly been issued by the field formation without properly appreciating returns of income tax as well as statements of wealth and also without proper application of mind as host of such cases pertains to income from property, salary, dividend etc. and also because the grounds advanced in the notices do not constitute ‘definite information’ within the meaning of Section of 122(8) of Income Tax Ordinance, 2001.

     “As the time limitation prescribed for initiating proceedings for the tax year 2015 draws closer, bar members are afraid of encountering more such weird notices in days to come, which in no way tend to serve the purpose of the Ordinance and are likely to create chaotic situation,” the tax bar said.

  • KTBA strongly condemns Israel’s atrocities in Palestine

    KTBA strongly condemns Israel’s atrocities in Palestine

    KARACHI: Karachi Tax Bar Association (KTBA) on Wednesday strongly condemned Israeli barbaric attacks on innocent Palestinians and demanded immediate halt of barbaric attacks in Gaza.

    KTBA President Muhammad Zeeshan Merchant, while leading the protest rally, expressed deep anger over the current violent Israeli atrocities on the innocent Palestinians.

    Showing solidarity with the Palestinian people, the tax bar expressed concerns over Israeli aggression and brutality in Palestine and strongly condemned the barbaric attacks on the innocent people.

    “The intensifying assault on Gaza is beyond the pale of humanity,” Merchant said, adding that it was an act of aggression and a pompous show of strength on the part of the Israeli military on innocent and helpless Muslims of Palestine.

    “Our members believe that hundreds of civilians’ causalities are horrendous for this so-called civilized world,” KTBA president said.

    The tax bar also condemned the Israeli attacks on offices of media organizations in Gaza. “We demand the atrocities perpetrated by the Israeli government and the military should be stopped immediately in Gaza.”

    “We believe in survival through co-existence but what is happening is not about the so-called Israeli’s right to exist.”

    The KTBA demanded the government to strongly speak and take stand to safeguard the sanctity of Qibla-e-Awwal as well as the right of Palestinians.

  • KTBA seeks further date extension for sales tax payment, return filing

    KTBA seeks further date extension for sales tax payment, return filing

    KARACHI: Karachi Tax Bar Association (KTBA) on Tuesday urged the Federal Board of Revenue (FBR) to further extend the last date for sales tax payment and filing monthly return as taxpayers are unable to comply with statutory requirement due to extended Eid holidays.

    The tax bar asked the tax authorities to extend the date of payment of sales tax and date of e-filing of the monthly sales tax return for the period April 2021 till May 24, 2021 and May 27, 2021, respectively to facilitate members of the bar and the compliant taxpayers to fulfill their legal obligation.

    While referring to a notification previously issued by the FBR to extend the date for payment of sales tax and filing monthly return for the period April 2021 issued on May 06, 2021, the date of payment was extended up to May 18, 2021 followed by filing of sales tax return till May 21, 2021.

    The KTBA said that may taxpayers and bar members had approached the association informing that the extended date (two days) for payment of sales tax for the tax period April 2021 was insufficient as businesses were not functional properly after Eid Holidays that were during May 10 to May 15, 2021 followed by Sunday on May 16, 2021.

    The KTBA also highlighted that in many cases taxpayers were unable to submit Annexure C as the last date of furnishing of Annexure C was May 10, 2021 which was also a holiday on account of Eid. It is important to note that unless Annexure C is submitted, sales tax payment amount cannot be calculated as payment of sales tax is dependent upon submission of Annexure C.

    The tax bar further informed that provincial revenue authorities had extended deadline for payments and filing of their respective sales tax returns between May 21 and May 27.

    “It is important to highlight that federal sales tax return cannot be furnished before the dates as extended by the provincial revenue authorities owing to the fact that input tax relating to services falling under the provincial domain can only be claimed in federal sales tax return once corresponding provincial sales tax return has been submitted by respective service provider,” the KTBA said.

  • Implementing full fledged VAT recommended in budget

    Implementing full fledged VAT recommended in budget

    Tax experts, gathered under the banner of the Karachi Tax Bar Association (KTBA), have strongly recommended the implementation of a comprehensive Value Added Tax (VAT) by the Federal Board of Revenue (FBR).

    (more…)
  • Framing sales tax rules for e-commerce recommended

    Framing sales tax rules for e-commerce recommended

    KARACHI: Tax practitioners have suggested the Federal Board of Revenue (FBR) for framing rules to bring e-commerce under sales tax laws.

    The tax practitioners under the umbrella of Karachi Tax Bar Association (KTBA) discussed upcoming budget 2021/2022 and proposed a comprehensive rules for e-commerce under sales tax laws.

    It is discussed that e-commerce of goods as well as services has gained significant momentum particularly in post COVID era. Through digital platforms, large number of vendors/service providers from informal economy can reach customers without setting up proper business structure.

    It is difficult not only for the tax authorities to capture such activity but also for the compliant taxpayers who want to discharge their obligations under the tax laws.

    Therefore, it is suggested that relevant provisions be amended, and detailed rules be framed for ecommerce in line with global best practices core features of which are:

    — Digital platforms, due to their control on the transactions, should be held responsible for collection and payment of sales tax where the vendor is unregistered

    — Small vendors earning revenue below 5 Million be exempted from getting registration under the Act

    — Appropriate provision for exemption from withholding tax should also be introduced