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Tag: Overseas Investors Chamber of Commerce and Industry

  • New tax legislation sought for Islamic banking

    New tax legislation sought for Islamic banking

    KARACHI: Federal Board of Revenue (FBR) has been suggested to draft new legislation for taxation of Islamic banking.

    It is proposed that the audited financial statements of Islamic banks as well as those of Islamic Banking branches/windows operations of conventional banks provided separately in the audited financial statements of conventional banks submitted to the State Bank of Pakistan should be taken as basis of calculation for income tax.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals of budget 2019/2020 highlighted:

    Rule 3: Treatment for Shariah compliant banking—

    — Any special treatment for “Shariah Compliant Banking” approved by the State Bank of Pakistan shall not be provided for any reduction or addition to income and tax liability for the said “Shariah Compliant Banking” as computed in the manner laid down in this schedule.

    — A statement, certified by the auditors of the bank, shall be attached to the return of income to disclose the comparative position of transaction as per Islamic mode of financing and as per normal accounting principles. Adjustment to the income of the company on this account shall be made according to the accounting income for purpose of this schedule.

    It is recommended that new legislation to be drafted to provide neutrality in the light of below:

    — The audited financial statements of Islamic Banks as well as those of Islamic banking operations of conventional banks provided separately in the audited financial statements of conventional banks and submitted to the State Bank of Pakistan shall form the basis for the calculation of income tax liability as provided in this Schedule.

    The OICCI said that the objective of Rule 3 of 7th Schedule was to provide tax neutral treatment to IBIs, however, it is difficult to meet the condition of Sub-Rule (2) of Rule 3, keeping in view the diversified nature of Islamic banking transactions and equating each transaction to a conventional equivalence and then getting it certified by the auditor which is time consuming and costly for Islamic Banking Institutions. Moreover, it does not give space for differentiated transactions as each transaction from Income Tax purpose has to be equated with a conventional transaction.

    It is thus proposed that the audited financial statements of Islamic Banks as well as those of Islamic Banking branches/windows operations of conventional banks provided separately in the audited financial statements of conventional banks submitted to the State Bank of Pakistan should be taken as basis of calculation for income tax with additions and deductions as provided in the Seventh Schedule to the Income Tax Ordinance, 2001 which is applicable to the entire banking industry in Pakistan.

  • Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

    Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

    KARACHI: The foreign investors and multinational companies have suggested the government to demonetize high denomination currency notes to eliminate parking lots for untaxed funds.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 suggested measures to eliminate legally permissible ‘parking lots’ for untaxed funds.

    The OICCI – representative body of foreign investors in Pakistan and multinational companies – suggested that defective mode and manner of valuation of immovable properties should be addressed. “Registration of sale and purchase of real estate should only be on fair market value at the time of the transaction,” it suggested and said necessary information on market value of real estate can be easily obtained.

    It further suggested that sale of all kinds of bearer securities, prize bonds, and other such items should be stopped.

    Appropriate restrictions should be imposed on the hoarding of foreign currencies.

    “High denomination currency notes should be demonetized.”

    The OICCI also suggested introduction of books of account and cash registers.

    The Federal Board of Revenue (FBR) does not have any proper shop-wise record of approximately 35 million SMEs, which are mostly sole proprietorship or partnerships, despite the fact that jurisdictions within the tax offices are location centric, especially for small and medium sized businesses.

    It should be made mandatory for all businesses to maintain books of account and taxes should be levied on ‘net income’ basis only.

    Registration of all retail outlets and electronic cash registers should be made mandatory without any turnover thresholds, which gives rise to tax evasion.

    The installation of these registers should be inspected regularly by tax inspectors.

    The FBR should engage with representatives of small manufacturers, wholesalers and retailers and ensure their buy-in for introduction of these documentation measures so that the previous back-tracking on these actions is not repeated.

    The book keeping requirements /outline be regularly upgraded considering the best practices learnt from other neighboring countries in the region with similar business infra-structure.

  • Amnesty schemes culture should be eliminated: OICCI

    Amnesty schemes culture should be eliminated: OICCI

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended the government to eliminate culture of amnesty schemes as such measures encourage tax evaders.

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  • FBR restructuring proposed to make autonomous body

    FBR restructuring proposed to make autonomous body

    KARACHI: The government has been proposed to make Federal Board of Revenue (FBR) as an autonomous body on similar line as State Bank of Pakistan.

    The Overseas Chamber of Commerce and Industry (OICCI) in its budget proposals for 2019/2020 suggested restructuring of FBR as an independent governing body.

    It suggested that FBR should be made an autonomous body on similar lines as State Bank of Pakistan, SECP, and Internal Revenue Services (IRS) of United States.

    FBR should operate and work in a corporate governance structure with a Board of Directors, vested with powers like that of the Boards of Public listed companies.

    The Chairman of FBR and fifty percent of the Board members may be nominated by the government (Ministries of Finance, Law, and Commerce) and, the remaining fifty percent Board members should be nominated by bodies like OICCI, PBC and ICAP.

    A transparent accountability system in tax administration should be introduced, and reasonable independence and empowerment given to various operational positions.

    The external audit of FBR should be done annually, by an independent international audit firm whose report should be presented and fully discussed in the Tax Policy Board meeting.

    There should also an Internal Audit function within the FBR for an effective ongoing internal audit reporting directly to the independent members of the Board nominated by the Trade bodies.

    Apart from revenue collection a key function of the FBR should be to address coordination issues between federal and provincial revenue authorities, with monthly meetings to ensure ease of doing business for taxpayers.

  • FBR suggested reducing income tax rate for banks

    FBR suggested reducing income tax rate for banks

    KARACHI: Federal Board of Revenue (FBR) has been advised to reduce income tax rates for banking companies in line with general corporate tax rates.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the banking sector tax rates have not been reduced in line with the general corporate tax rates.

    Furthermore, Finance Supplementary (Second Amendment) Bill 2019, proposed to again amend the First Schedule to the Income Tax Ordinance 2001, whereby, Super Tax of 4 percent is applicable on banks from tax year 2018 to tax year 2021.

    The banks, in compliance with the prevailing taxation regime have already closed the tax year 2018 (accounting year 2017) and income tax returns have already been duly filed/assessed.

    As a result of the proposed abovementioned retrospective application from tax year 2018 (accounting year 2017), banks would now have to effectively pay super tax for two years or 8 percent instead of 4 percent in tax year 2019 i.e. 4 percent already paid in advance for tax year 2019 along with retrospective charge of 4 percent now being proposed for tax year 2018.

    The OICCI suggested that the tax rates of the banking sector should be aligned with other sectors.

    It is recommended, application of super tax on tax year 2018 should be removed to avoid the double charge of super tax in tax year 2019.

    Furthermore, it is requested that the same overall relief on super tax, granted to other industries, is also provided to the banking sector as well.

  • Exemption on import of telecom equipment demanded to encourage investment

    Exemption on import of telecom equipment demanded to encourage investment

    KARACHI: Foreign and multinational companies have demanded the Federal Board of Revenue (FBR) to exempt sales tax and customs duty on import of telecom equipment in order to encourage investment in this sector.

    The Overseas Chamber of Commerce and Industry (OICCI) in its proposals for budget 2019/2020 said that telecom was very investment intensive sector and it should be given concessions in terms of reduced rates of customs duties and exemption of sales tax against import of telecom equipment.

    The exemption and concessions are important to promote the teledensity throughout the country especially in far flung areas so that the benefits of next generation mobile services can be reached to the masses living in backward areas, said the OICCI – the representative body of foreign investors and multinational companies in Pakistan.

    Previously, telecom sector was importing telecom equipment at 5 percent customs duty and zero percent sales tax under SRO 575, however, through Finance Act, 2015, this SRO was rescinded and consequently, the customs duties on network equipment have been increased from 5 percent to 20 percent and sales tax exemption has been removed.

    “The increase in custom duty and levy of sales tax has badly affected the pace of growth and digital inclusion as the cost of doing business has been significantly increased which is an additional barrier to network coverage in Pakistan,” the OICCI said.

    The roll out of 3G/4G network is still very much at the early stages and reduction in customs duties and restoration of sales tax exemption will help the operators to sustain the necessary investments.

    Therefore, the OICCI recommended to reinstate the concessionary custom duties/ exemption of sales tax (refer SRO 575) to encourage investments in IT/ telecom infrastructure.

  • OICCI welcomes Shabbar Zaidi’s appointment as FBR chairman

    OICCI welcomes Shabbar Zaidi’s appointment as FBR chairman

    KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI), has appreciated the appointment of tax expert Shabbar Zaidi as Chairman of the Federal Board of Revenue (FBR), a statement said on Wednesday.

    The OICCI President, Shazia Syed commenting on the appointment said “Shabbar Zaidi, is a well-respected tax professional, who has been closely associated with tax policy and administration in Pakistan for many years.

    The appointment of Shabbar Zaidi as FBR Chairman by the government is very commendable as it will strengthen the FBR capacity substantially.”

    Shazia was confident that “with full support from a well experienced and large FBR team, the new FBR Chairman will be able to lead the needed transformation of the tax culture and significantly boost the tax collection, in line with the true revenue potential of the economy.”

    The OICCI reminded that in the World Bank’s 2019 Ease of Doing Business (EODB) rating, Pakistan was assessed as the 17th worst country in the world on the parameter of ‘paying taxes’.

    The OICCI is hopeful that with a rejuvenated FBR, supported by a close coordination among the provincial tax authorities, and government’s clear direction to improve on EODB, the country will significantly improve its EODB rating.

    The recently concluded IMF–Pakistan staff level agreement also recommends tangible actions to revamp the tax regime and boost the tax to GDP ratio in line with the relevant international standards.

    OICCI members comprising of leading multinationals operating in Pakistan contribute about one third of the total tax collection, the highest by any trade body.

    OICCI has already submitted a series of progressive taxation proposals for the 2019-20 Fiscal Budget to FBR and provincial revenue authorities mainly focusing on facilitating investment and growth in the economy, including need for longer term incentives to boost FDI in the large greenfield and job creating manufacturing facilities, and ensuring implementation of predictable, consistent and transparent policies.

    OICCI has also strongly urged for Revamping of Withholding Tax Regime from current over 50 sub-clauses/provisions to less than ten, with number of tax rates reduced substantially, better coordination between Federal and Provincial Legislations, with policies and tax rates harmonized across all jurisdictions, integration of all revenue authorities in such a way that each Authority remains functional but with one window solution for filing a simplified single return for both Federal and Provincial Taxes.

    OICCI has also shown serious concern on the booming illicit trade with significant damage to revenue base of the economy and urged the authorities to re-visit Afghan Transit Trade agreement supported by structural reforms in Customs to stop the highly visible availability of smuggled foreign FMCG products.

    OICCI has also given workable recommendations, including the use of IT technology, for substantially improving the Documentation of the economy and Broadening of Tax Base, besides reducing the frequency of interaction of the tax officials with the compliant tax payer.

  • 100pc foreign shareholding allowed in legal entities incorporated in Pakistan: Razak Dawood

    100pc foreign shareholding allowed in legal entities incorporated in Pakistan: Razak Dawood

    KARACHI: Abdul Razak Dawood, Advisor to the Prime Minister on Commerce, has said that 100 percent foreign shareholding remained allowed in legal entities incorporated in Pakistan.

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  • Saudi Arabia, UAE plan huge investment in Pakistan: Razak Dawood

    Saudi Arabia, UAE plan huge investment in Pakistan: Razak Dawood

    Saudi Arabia and the United Arab Emirates (UAE) are gearing up for substantial investments in the country, according to Abdul Razak Dawood, the Adviser to the Prime Minister on Commerce and Textile.

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  • Foreign investors’ Pakistan business confidence index decline by 26 percent

    Foreign investors’ Pakistan business confidence index decline by 26 percent

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) on Friday released results of its Business Confidence Index (BCI) Survey – Wave 17, which shows that the overall Business Confidence in Pakistan stands at negative 12 percent, a 26 percent decline from the 14 percent positive recorded in the Wave 16 results announced in May last year.

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