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Tag: Overseas Investors Chamber of Commerce and Industry

  • Abolishing withholding tax, reducing sales tax rate on telecom services recommended

    Abolishing withholding tax, reducing sales tax rate on telecom services recommended

    KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax rate at 12 percent on telecom services to promote the accessibility of internet/data services to the low-income group.

    Similarly, Federal Excise Duty (FED) is charged at 17 percent on telecom services which is on higher side as compared to other sectors, and general rate.

    Provincial authorities levy a much lower rate of sales tax on other services. Since sales tax is a consumption tax (on usage), the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.

    There should be single sales tax rate across all jurisdiction to remove the anomalies and undue hardships being faced by telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business.

    These recommendations have been sent by Overseas Investors Chamber of Commerce and Industry (OICCI) to the Federal Board of Revenue (FBR) for the budget 2021/2022.

    The OICCI further recommended that since the insertion of 9th Schedule in Sales Tax Act, 1990 effective 1st July 2014, the matter is in litigation. This tax should be abolished, ab initio, by accepting the decision of Lahore High Court as the resolution of the matter will result in additional upside on the corporate tax side for the exchequer and eliminate the undue litigations.

    On the issue of advance tax on Auction/ Renewal of telecom licenses at 10 percent under section 236A of Income Tax Ordinance, 2001, the OICCI recommended that this tax should be abolished being irrational and burdensome on CMOs keeping in view the financial/ tax position.

    The chamber said that as large utility providers, Cellular Mobile Operators’ (CMO) are subject to deduction/collection of withholding of income tax on large number of transactions, which increases the cost and complexity of tax compliance and an additional administrative burden for the telecom sector and negatively impacts the overall business environment.

    It is recommended:

    i. Exemption should be given to the telecom sector from deduction or collection of all types of withholding taxes, like banking and oil sector. There will be no loss of revenue to the exchequer as the tax collection mechanism will be simplified in terms of real time payment of advance tax Under Section 147 on quarterly basis.

    Furthermore, this measure will also make the tax claims and its verification mechanism more transparent with minimum operational hassles as maintaining the thousands of records especially for advance tax on utility bills and imports is itself a very cumbersome procedure.

    ii. Amendments need to be made in the section 147 for the calculation of tax liability. Currently the calculation of tax liability is based on the last assessed position and turnover of the year. The assessed position should not be used as a basis of calculation of tax liability until and unless an independent forum (i.e. At least Tribunal) has also confirmed the assessed position.

    The OICCI recommended to reduce the custom duty rates for batteries (8507.6000) to 5 percent and to abolish additional custom duty and Regulatory duty, as these batteries are used with solar and power systems and are core asset for telecom infrastructure services provider. Reduction in duties will further encourage alternate energy resources for Telecom sector e.g. Solar etc.

    On the issue of custom duty and Regulatory duty on import of telecom equipment, it is recommended to restore SRO 575, reduce Custom duty to 5 percent and abolish the Additional Custom duty and Regulatory duty as the core assets needs to be imported for provisioning of telecom services.

    The OICCI demanded exemption from advance tax on electricity for Telecom Tower Infrastructure Companies. The chamber said that currently taxpayers can obtain exemption certificate for non-deduction of tax on electricity bills under section 235(3) of ITO 2001 if their income is exempt under the law or by discharging their advance tax liability for the year. Such exemption is not available to telecom service providers as their tax liability is minimum under section 153(3) of the ITO, 2001.

    Enabling provision may be inserted in section 235 of the ITO, 2001 to empower the Commissioner to issue exemption certificate to Service Providers under minimum tax regime for non-deduction of advance tax on electricity bills.

  • Foreign investors demand pending refunds payment in six months

    Foreign investors demand pending refunds payment in six months

    KARACHI: Foreign investors operating in Pakistan have demanded to clear all pending sales tax refunds in next six months.

    Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors, in its proposals for budget 2021/2022 demanded that all pending tax refund be cleared within next six months in an orderly/ prearranged manner.

    The OICCI further suggested that verification process for refunds should start automatically as soon as an application for refund is filed by the taxpayer and tax refunds should be cleared within 45 days.

    With introduction of MIS on IRIS, it has become easy to introduce an online self-verification of refund. Wherein taxpayer after applying for refund verification us 170 may be given an option to select CPRNs online against each section wherein tax deduction/ collection has been made and create a virtual verification file for easy processing by assessing officers. In case of any discrepancy, only missing CPRNs will be verified manually.

    It is suggested that inter adjustment of Income tax and Sales tax refunds should be made part of the law.

    A timely settlement of the determined refunds should be made, and if there is a liquidity issue then issuing marketable government bonds/ securities be considered.

    Amend current fixed interest rate of 10 percent to floating interest rate linked with KIBOR, it is suggested.

  • Listed companies should be exempted from electronic tax surveillance

    Listed companies should be exempted from electronic tax surveillance

    KARACHI: Federal Board of Revenue (FBR) has been urged to exempt listed companies from electronic surveillance of business and records.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 said that through SRO 888 of 2020 dated September 21, 2020, a new chapter was introduced in Sales Tax Rules, 2006 whereby all registered persons are made liable to give continuous and full real-time electronic access to the premises, stocks, record, accounts and data, whether maintained electronically or otherwise, as and when required by an authorized officer as provided under section 38 of the Act.

    The OICCI recommended that the scope should be restricted to the taxpayers having series of defaults or misconduct.

    “Other taxpayers especially listed companies should be exempted from this requirement as they are subject to rigorous external audits, internal audit requirements by SECP and tax audits and monitoring by FBR,” it recommended.

  • Bank account holders should file tax returns, wealth statements

    Bank account holders should file tax returns, wealth statements

    KARACHI: Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) should devise a framework to ensure all customers of financial institutions whose account show turnover above Rs2 million have filed tax returns and wealth statement.

    “This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts,” this was recommended by Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022.

    The chamber presented its proposals for broadening of tax base:

    FBR should simplify the tax structure of the country by implementing tax reforms recommendations already been submitted by various forums in the past, and also hold regular round table conferences with leading tax and legal experts to review existing laws for increasing the number of taxpayers and taxable entities.

    Tax authorities should use technology, data analytics including Artificial Intelligence tools and make better/effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “Filers”, with submission of annual income tax/wealth returns and wealth reconciliation statements. FBR and SBP to devise a framework to ensure all customers of financial institutions whose account shows turnover in excess of PKR two million or more during the year, have filed a tax return and wealth statement. This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts.

    Art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis. iv. Once the FBR receives the above information, it should be pro-active and pursue potential taxpayers by sending them income tax return forms requiring them to file tax returns – rather than waiting for the tax returns to be filed.

    Section 111(4) of ITO 2001, last amended in 2018, should be further reviewed to restrict tax free inward foreign remittances to immediate family members only.

    Eliminate culture of Amnesty Schemes as it discourages the honest taxpayers.

    Severe, and visible, penalties should be levied to punish tax evaders, starting with evasions of over PKR one million.

    As Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which became operational from September 2018, regular coordination should be done with relevant authorities of countries, considered as tax heavens for stashing away illegal wealth, for information sharing, and cases of proven tax evasion publicly shared.

    Appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any kind of assets outside the country for which source of income could not be established.

  • Revamping withholding tax regime with maximum five rates recommended

    Revamping withholding tax regime with maximum five rates recommended

    KARACHI: Federal Board of Revenue (FBR) has been urged to revamp withholding tax regime and bring down the existing 50 different tax rates to maximum five rates.

    Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors operating in Pakistan and multinational companies, in its proposals for budget 2021/2022 suggested the FBR to revamp the withholding tax regime, which is one of the key irritants for compliant taxpayers.

    It said that the fact that the ‘Collection and Deduction of Income Tax at Source (Withholding Agents Perspective) (Taxpayer’s Facilitation Guide)’ on the FBR website is of 48 pages highlights the complexity of the withholding tax regime which has more than 30 tax provisions that need to be followed and 50 different tax rates, applicable on nearly all heads of receipts/payments.

    The rate of withholding/advance tax also varies depending upon the nature of transaction, legal/tax status of the parties i.e., company or individual and active or in-active filer.

    Moreover, FBR system does not auto populate taxes withheld in the portal to the credit of the beneficiary.

    Furthermore, different categories of withholding tax (WHT) rates have been prescribed under the ITO 2001, for various types of payments and it has become extremely difficult for the person processing payments to be precise and accurate in applying WHT rates and ensure compliance:

    The complexity for the withholding agent has been further compounded after the introduction of active taxpayers list and different rates for an active and non-active filer.

    The OICCI recommended the following:

    i. Withholding tax regime should be revamped by reducing it to a maximum of five rates for all withholding taxes and the differentiation should be on the basis of active and inactive taxpayers only.

    ii. All taxes withheld should be auto populated in the portal to the credit of the beneficiary.

    iii. Final Taxation Regime should be eliminated, and all withholding taxes should be available for adjustment and the operations wing of FBR should ensure that all persons whose taxes have been deducted file their tax returns.

    iv. Withholding agents should be given incentive in the form of 2% tax credit of the amount collected for facilitating the Government.

    v. In addition to the above administrative/streamlining issues, withholding/ advance tax rates on below transactions should be reconsidered.

    a) Withholding tax rate be reduced to 0.25% for all distributors in line with the withholding taxes applicable on dealers and sub-dealers of fast-moving consumer goods.

    b) Withholding tax rates applicable on services is 8 percent minimum tax regardless of the actual taxable income of the service provider. The nature of this tax effectively becomes indirect tax and increases the cost of doing business for service providers, hence, tax on services should be made adjustable.

    vi. Withholding tax deduction u/s 153 (1)(a) which is currently considered as minimum tax for all the suppliers (except manufacturers and listed companies) should be made adjustable at least for corporates appearing in active taxpayers’ list.

  • Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    Foreign investors propose abolishing FTR, adjustable all withholding tax provisions

    KARACHI: Foreign investors operating in Pakistan have suggested the government to abolish Final Tax Regime (FTR) and make all provisions pertaining to withholding tax as adjustable.

    In its proposals for budget 2021/2022, the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday said it had submitted comprehensive taxation proposals for the Federal Budget 2021-2022 which highlight various measures required  to streamline the complex tax regime, incentivize the legitimate tax payer through Ease of Doing Business measures and ensure filing of tax returns by all income earners. 

    Commenting on the Taxation proposals , Irfan Siddiqui, OICCI President, acknowledged that the government has taken various bold measures in the face of many economic challenges, including those emanating from the Covid 19 impact on the local and international trade and business”.

    Irfan Siddiqui added:  “OICCI members are fully conscious that the continuing spread of Covid-19 poses exceptional challenges to the government and have therefore decided not to seek a number of taxation relief measures which, under normal circumstances, would have been justified to boost FDI and align Pakistan to compete with other regional countries.”

    OICCI has strongly recommended that the Minimum Tax regime should be rationalized with a lower level general tax rate and immediately reduced to 0.2 percent  for certain industries, like oil refining and oil marketing companies, with high turnover and low/government regulated  margins.

    “Moreover, Withholding tax regime (WHT) with over 45 rates is cumbersome and needs to be immediately rationalized to 5 rates for filers. Final Tax regime should be abolished and all withholding taxes should be made adjustable. FBR should ensure that all those persons who have been subjected to withholding taxes should file regular tax returns.”

    OICCI Secretary General , Abdul Aleem , giving further details of the key Taxation proposals from the chamber highlighted the need to introduce one unified Sales Tax rate of 13  percent, as applicable in Sindh, and one common tax return form throughout the country, filing of a single tax return with FBR instead of separate ST returns to the authorities in every province. He also stated Income Tax rebate of 2 percent for Shariah Compliance investment have not been effective and the intent of the regulators will not be realized until these are aligned with SECP Shariah regulations. 

    M. Abdul Aleem also stated that OICCI has recommended for substantial increase in FED on unmanufactured tobacco to arrest massive tax evasion in the tobacco industry. This together with introduction of Track and Trace Monitoring system will boost FBR revenue significantly. OICCI also proposed introducing stringent controls and penalties for illicit trade across the whole value chain. Pending review and revision of Afghan Transit Trade agreement (ATTA) , there is need to harmonize duty and tax rates to remove incentive for duty evasion. 

    Highlighting the need for Ease of Doing Business and promoting tax culture in the country , OICCI has recommended that the Tax regime should be simplified with massive reduction in the number of tax payments and filing of various forms/returns. Pending tax refunds should be settled withing 45 days and inter-adjustment of income/sales tax refunds be allowed in the law.

    In line with the latest focus in the country on digitization of the economy, FBR and associated tax authorities need to substantially upgrade their use of digital technology, data analytics, including Artificial Intelligence tools to effectively use a strong data base already available in the country from NADRA and other documented sources  so as to ensure that all income earners regularly comply with the tax requirements. 

    In conclusion, Abdul Aleem observed that OICCI members believe in the potential of Pakistan , despite challenges, which can be harnessed with positive and regular engagement of relevant authorities and private sector.

    There is need to continuously  improve and align policies and practices in Pakistan with the best in the region, to be able to attract sizeable FDI in the  manufacturing , IT and services export  and other job creating sectors.

  • Foreign investors elect Irfan Siddiqui as body chief

    Foreign investors elect Irfan Siddiqui as body chief

    KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has elected Irfan Siddiqui as its president for the 2021 term at its annual general meeting held on Monday. Siddiqui, who currently serves as the President and CEO of Meezan Bank Limited, will lead the chamber, which represents foreign investors in Pakistan.

    (more…)
  • Foreign investors contribute Rs16 billion for minimizing coronavirus impact

    Foreign investors contribute Rs16 billion for minimizing coronavirus impact

    KARACHI: The foreign investors operating in Pakistan have contributed Rs16 billion in different CSR activities and for containment of the negative impact of coronavirus.

    In addition to monetary contributions the CSR activities of OICCI members included investment of their employees’ time in different value adding social activities across Pakistan with the underlying commitment to uplift the underprivileged strata of the society and support them during this most challenging time in recent memory brought about by the advent of the Corona pandemic, a statement said on Wednesday.

    About 100 of the leading foreign investors, members of the Overseas Investors Chamber of Commerce and Industry (OICCI), actively participated in support of the GOP’s effort to fight the pandemic of COVID-19, without stepping back from their continuing commitment to CSR activities which benefit the marginalized communities across the country.

    Haroon Rashid, President OICCI applauded: “OICCI members who have been leading the contribution towards CSR initiatives and are recognized as a role model to motivate other businesses and affluent individuals“.

    “Over the last few years, there has been a noticeable enhancement in the sustainability and CSR initiatives by the OICCI members through a proactive engagement between business and all stakeholders in society. OICCI members have adopted the best CSR and Sustainability practices, largely in line with the United Nations Sustainable Development Goals (UN SDGs) to meet the growing needs of the society,” Haroon added.

    The annual  Corporate Social Responsibility (CSR) Report 2019-2020 brings out the essence of the CSR activities of about half of OICCI members who during 2019-20, collectively, invested about PKR 8 billion on CSR related activities, excluding those on COVID-19 mentioned above, and reached out to around 62 million direct beneficiaries throughout Pakistan.

    OICCI members and their employees spent around 1.5 million man-hours and partnered with 160 social and development sector organizations in fulfilling their unique CSR programs.

    The reach of the CSR activities touched all provinces and the geographic distribution was 29% in Sindh, 26% in Punjab, 14% in Khyber Pakhtunkhwa, 12% in Baluchistan, 6% in FATA, and 8% each in Gilgit-Baltistan and Azad Kashmir.

    In terms of specific UN SDGs, 79% of the OICCI members focused on (i) Health and Well-Being and (ii) Quality Education, especially new primary and secondary school facilities and vocational training programs for skills development.

    Many of the members also actively supported health and nutrition related initiatives through donations to reputable hospitals, medical care camps and health awareness campaigns.

    OICCI in a statement highlighted that the March 2020 pandemic challenge to OICCI members, and their stakeholders, was enormous and is still continuing.

    However, due to international outreach of OICCI members, they led from the front and shared the best practices for protecting the health and wellbeing of their employees, business partners and other stakeholders.

    None of the OICCI members laid off their workers due to slow down in the business activity at the outbreak of the pandemic.

    Most of the OICCI members positively responded to the Government of Pakistan’s call for support in containing the spread of the pandemic, protecting the health and supporting economic needs of the underprivileged populace in the face of COVID-19 immediate challenge, and contributed about PKR 7.8 billion to various pandemic focused containment causes.

    It is pertinent to mention that 63% of the members were focused on Gender Equality in support of ‘OICCI Women’ initiative which is gaining momentum since its launch in 2017. “We believe the OICCI Women initiative could become a motivating factor for other businesses in Pakistan to raise the level of women participation, thereby contributing towards a rapid economic growth of the country,” M. Abdul Aleem, Secretary General OICCI commented.

    OICCI Corporate Social Responsibility (CSR) Report 2019-2020 released yesterday gives details of the contributions of the member companies, working across the country, in a number of diverse social sectors.

    OICCI is the collective body of top 200 foreign investors in Pakistan, belonging to 35 countries, who are also the largest contributor to the economy of Pakistan besides being the largest foreign investors.

  • Foreign investors express concerns over lack of attention on IPR protection

    Foreign investors express concerns over lack of attention on IPR protection

    KARACHI: Foreign investors operating in Pakistan have expressed concerns over lack of attention by government authorities on protection of Intellectual Property Rights (IPRs).

    The concerns have been expressed in a survey conducted by Overseas Investors Chamber of Commerce and Industry (OICCI).

    The OICCI announced the key findings of its latest IPR Survey on Wednesday. The OICCI IPR Survey 2020 conducted during September-October, which reflected the assessment of the foreign investors, on the state of intellectual property protection in Pakistan.

    Effective protection of IPR comprising of Copyrights, Patents and Trade Mark is critical for attracting and retaining FDI (Foreign Direct Investment) in the country.

    “OICCI IPR Survey 2020 respondents have expressed concern that IPR protection does not attract due attention from some key stakeholders, including the government, Law Enforcement authorities (LEA), media and even the consumers,” according to the study.

    Long drawn judicial proceedings, lack of awareness and appreciation about IPR, and lengthy timelines for granting IP rights were some of the key concerns highlighted in the survey.

    Overall 40 percent of the respondents indicated that it takes 1 to 3 years to resolve a standard IPR dispute. Respondents also expressed concern regarding the penalty on IPR violation being insufficient to act as a deterrent and the IP Tribunals not being fully functional.

    Currently, over 90 percent of the OICCI members prefer reliance on their own resources for monitoring threat of IPR violations. However, there is a great desire for all the IP owners to work in partnership with the government authorities for a better IPR regime in Pakistan.

    The foreign investors participating in the survey expect that IPR regulator in Pakistan, IPOP, would take the lead in strengthening IPR regime in Pakistan; automate and fast track process of registering IP; massively promote awareness on the importance of IPR and its impact for business/investment; upgrade skills and motivate LEA to proactively arrest the abuse of IPR.

  • Market based exchange rate helps shrinking current account deficit: SBP governor

    Market based exchange rate helps shrinking current account deficit: SBP governor

    KARACHI: Dr Reza Baqir, Governor of State Bank of Pakistan (SBP) has said that market based exchange rate helped shrinking current account deficit.

    In an interactive session with leading foreign investors, members of the Overseas Investors Chamber of Commerce and Industry (OICCI), he shared an overview of the current Economic Outlook of Pakistan and informed: “since, June 2019, Pakistan has transitioned to a market-based exchange rate regime, resulting for the first time ever in an orderly two-way movement of exchange rates in the country, which has led to a significant shrinking of the current account deficit, and better fundamentals facilitated capital inflows.”

    The fiscal deficit narrowed to 3.8 percent of GDP in July-March FY20 with the current account balance in surplus for the first time since 2016”.

    He added: “a year ago SBP was being perceived as inflicting tough stabilization measures after Pakistan had successfully started an economic reform program to address external and fiscal imbalances and later after the onset of COVID-19 the Government and central bank gave a timely and calibrated economic response without compromising buffers and as a result today the focus is on economic growth of the country,” a statement issued by OICCI quoted SBP governor as saying.

    Dr Baqir also shared that overall Rs1.73 trillion or 4.1 percent of the GDP of Pakistan was injected by SBP in the economy to support individuals and businesses during COVID-19 through various proactive measures, including dramatic reduction in interest rates from 13.25 percent to 7 percent, loan deferment, employment support and Rozgar Schemes.

    He further added SBP is taking appropriate and timely actions to address the ever changing economic environment.

    President OICCI, Haroon Rashid highlighted the significant economic contribution of foreign investors at OICCI, who are among the largest economic stakeholders and have invested over $ 16 billion in the past eight years and continue to have a positive view of the opportunities for investment despite the ongoing challenging economic environment in the country.

    OICCI shared with Dr Reza Baqir the key concerns of OICCI members, including delays in approval of forex payments and cumbersome documentation requirements and sought the Governor’s support in the light of SBP policy to facilitate FDI through improving Ease of Doing Business in Pakistan.

    Dr. Reza Baqir appreciated the contribution of OICCI members to the national exchequer and encouraged all members to figure out ways to increase exports and adopt import substitution practices, as it was a critical step towards moving the country out of poverty.

    “SBP is moving towards digitalization of payment processes and proactive engagement that will address the major issues systematically and facilitate the business community,” informed the Governor.

    Dr. Reza also mentioned that through an online case look-up portal, it is now possible for companies to monitor the progress of their respective cases submitted to SBP with increased transparency.

    He agreed on the need for continuous dialogue with the OICCI members and invited the OICCI members to meet the SBP leadership at regular intervals for timely resolution of their issues.

    While concluding the session, Haroon Rashid commented “OICCI members appreciated the SBP efforts towards continuous improvement in the economy”, and presented a comprehensive list of recommendations to facilitate ease of doing business in Pakistan.