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Tag: Pakistan Business Council

  • Minimum tax collection should be suspended for two years

    Minimum tax collection should be suspended for two years

    KARACHI: Pakistan Business Council (PBC) has recommended suspending minimum tax under Section 113 of Income Tax Ordinance, 2001 considering the pandemic of COVID-19 and its impact on businesses.

    The PBC in its budget proposals 2020/2021, said that a turnover based minimum tax is fundamentally flawed in that it fails to take account of the industry specific margins and acts as a barrier to entry of new players.

    A minimum tax at 1.5 percent of sales for manufacturers (and higher rates for the services industry), under the present depressed business conditions will put an unbearable burden on businesses.

    “Pending a review of the continued justification of minimum tax, under the current business circumstances, we recommend that its collection be suspended for at least the next two financial years.”

    The PBC further said that as per Section 61 of the Income Tax Ordinance, 2001, persons falling under the Minimum Tax Regime / Alternative Corporate Tax are not able to claim any sort of tax credit on donations.

    Considering the situation of last quarter ending June 2020 due to COVID, many companies would fall under the minimum tax regime due to reduced product demand and margin issues.

    Section 61 of the Income Tax Ordinance, 2001 be amended to allow direct deduction of donations paid by any person to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 or any other Fund established by any Provincial Government or to any other approved Non-Profit Organization subject to the condition that the said donation should be made through crossed cheque.

    Moreover, in case of donation in kind, deduction against minimum turnover tax be allowed on the basis of valuation prescribed under Rule 228(4) of the Income Tax Rules, 2002.

    At present, rate of tax deduction on export proceeds is 1.0 percent.

    In order to promote sustainability of industries engaged in exports, rate of tax on export proceeds should be reduced to 0.5 percent from 1.0 percent for the next two financial years.

    In order to get exemption certificate against tax deduction under sections 153 [supply of goods] and 148 [import on goods], taxpayers are required to pay advance tax

    Taxpayers should be allowed unconditional exemption from tax deduction on import and supply stage without heavy upfront payment of advance tax liability. In order to ensure regular inflows to the Government, taxpayers be made liable to discharge at least 70 percent [as against present 90 percent condition] of total estimated annual tax liability in 4 quarterly instalments.

  • FBR suggested reduced corporate tax rate for job creation

    FBR suggested reduced corporate tax rate for job creation

    KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce corporate tax rate by one percent for companies creating 50 or more new jobs in a year.

    Pakistan Business Council (PBC) in its tax proposals for budget 2019/2020 suggested the government to reduce tax rate for companies creating more jobs during a year.

    “One percent lower tax rate for existing companies that create 50 or more new jobs on their own payroll in a year.”

    Giving rationale to the proposal, the PBC said that Pakistan needs to find employment for two million youth each year.

    The PBC further suggested first year depreciation allowance for investment in making upgrades to the provision of facilities (including lifts, ramps) for the specially challenged in the workplace or business.

    It further suggested 0.5 percent lower tax rate for providing livelihoods to specially challenged persons equal to five percent of the workforce.

    Giving rationale to the changes, the PBC said that in order to demonstrate a commitment to creating livelihoods for all and work toward target of sustainable development goal – “By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.”

    It further said that no or limited facilities that allow access in the workplace or business for the specially challenged thereby deterring the disabled from working.

  • FBR advised reducing income tax to half for exporters other than five zero-rated sectors

    FBR advised reducing income tax to half for exporters other than five zero-rated sectors

    KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce the income tax rate to half for exporters not falling under five zero-rating scheme in order to promote and diversification of exports.

    Pakistan Business Council (PBC) in its tax proposals for forthcoming budget 2019/2020 said that at present the rate of tax deduction on export proceeds under Section 154 of Income Tax Ordinance, 2001 is one percent, which is same as for five export oriented sector as well as for other than five sectors.

    The council said that in order to promote diversification of exports instead of relying on only five specified sectors, rate of tax on export proceeds should be reduced to 0.5 percent from one percent for sectors which are not covered under the five specified export oriented sectors.

    Giving rationale for the change, it said that at present sales tax zero rating is available to five specified export oriented sectors on their input materials whereas such benefit is not available to other potential export sectors.

    Moreover, gas supply is also available to five specified sectors at 600/MMBTU whereas rate of gas per MMBTU for non-conventional sectors is Rs780 in addition to GIDC, which makes potential export uncompetitive and consequently, Pakistan is unable to diversify export markets.

    “In order to compensate such exporters and to promote export of other than five sectors, rate should be decreased to five percent for such sectors,” the PBC recommended.

    The PBC further pointed out that manufacturing bond/DTRE rules are cumbersome and in certain cases lack clarity whereby many potential exporters cannot avail them. Consequently, it results in lost exports.

    Therefore, it is recommended that manufacturing bond/DTRE rules should be modified to make it easily accessible and lend full clarity to allow exporters to fulfill potential export orders.

    The proposed amendment would increase exports by facilitating existing and potential exporters.

  • FBR suggested abolishing withholding tax for corporate manufacturers

    FBR suggested abolishing withholding tax for corporate manufacturers

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish withholding tax on import stage for corporate manufacturers in order to attract investment in the country.

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  • Omitting condition on input sales tax claim proposed where tax unpaid by supplier

    Omitting condition on input sales tax claim proposed where tax unpaid by supplier

    KARACHI: Pakistan Business Council (PBC) has suggested to omitting the condition of disallowing input tax adjustment where tax unpaid by supplier.

    In its tax proposals for budget 2019/2020, the PBC said that according to Section 8(1)(ca) of Sales Tax Act, 1990, input sales tax is not allowed where tax unpaid by supplier.

    “A taxpayer is not entitled to claim input tax paid on the goods (or services) in respect of which sales tax has not been deposited in the government treasury by the respective suppliers.

    The PBC said that this provision needs to be omitted especially after the implantation of the STRIVe system.

    Giving rationale to the proposal, it said that the matter was challenged in the Lahore High Court (LHC), in a petition W.P.No.3515/2012 filed by D.G Khan Cement Company Limited.

    LHC permitted relief and declared the provision as unconstitutional.

    “With the implementation of the STRIVe system this is redundant,” the PBC said.

    The PBC further said that based on the Doctrine of Revenue Neutrality and plethora of judgments of superior courts, it is now a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.

    However, unfortunately, such provision is not part of the Sales Tax Act, 1990.

    It proposed that Sub-Section 4B should be inserted in Section 11 of the Sales Tax Act with the purpose of introducing “doctrine of revenue neutrality”.

    It is a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.

    Proposed insertion in Section 11 of the Sales Tax Act 1990:

    “(4B) Where at the time of recovery of sales tax under sub-section (1), (2), (3), or (4) and (4A), it is established that the sales tax that was required to be paid has been meanwhile been paid by that person or recovered from the supply chain, no recovery shall be made from the person who had failed pay the sales tax or had paid short-amount of sales tax.”

  • PBC presents tax proposals for reducing cost of doing business

    PBC presents tax proposals for reducing cost of doing business

    KARACHI: Pakistan Business Council (PBC) has suggested measures for reducing cost of doing business and promoting manufacturing and industrialization.

    In its tax proposals for budget 20119/2020, the PBC suggested following measures for reducing cost of doing business:

    Exemption from collection of Withholding tax under section 148 at import stage & exemption for manufacturing concerns under Section 153

    Procedures and rules for obtaining exemption certificates for import of plant & machinery and Raw material by tax payers have serious restrictions which causes hardship.

    Proposed Change

    Corporate manufacturing sector should be excluded from the purview of income tax withholding at import stage under section 148 as well as from tax deduction on local supply under section 153. Similar exemption is already given to the greenfield industries through the Finance Supplementary Second Amendment Act 2019 announced in March 2019. The same exemption, however, is not available, for the brownfield expansion.

    Moreover, all the companies engaged in manufacturing should be exempt from withholding of tax under section 153. Similar exemption is available for Sales Tax in the Sales Tax Special Procedure (Withholding) Rules, 2007 via SRO 586 dated July 1, 2017.

    Alternatively, issuance of exemption certificate from withholding under section 148 and 153 should automatically trigger on the FBR portal based on payment of quarterly advance tax under section 147 to avoid harassment of genuine taxpayers. This will enable taxpayers to avoid creating huge tax refunds and focus on more expansion.

    Rationale for Change

    This would increase the investments for brownfield capacity expansion as well and would provide a meaningful relief (similar to greenfield expansion) with regard to BMR and extension/ expansion. Further, it will also attract foreign direct investment in the form of new expansion ventures as well as partnerships and hence will also result in export growth.

    Estimate and Payment of Advance Tax Section 147

    The time for making the estimate of income has been changed by the Finance Act, 2015 from ‘before the last installment is due’. 50 percent of the difference is required to be paid along with the 2nd installment and 50 percent of the difference with 3rd and 4th installments in two equal installments.

    Furthermore; Finance Act, 2018 has required the taxpayer to submit the actual turnover of completed quarters of the tax year with estimate (submitted earlier) and reasons for variations thereto along with documentary evidences. The Commissioner is now also empowered to reject the estimate, if he is not satisfied by the reasons and evidence of such variation.

    Proposal

    We recommend that this sub-section be restored to its original position (before finance bill 2018-19) whereby the taxpayers can file its best judged estimate without any questioning by the tax department. Moreover; section 205 (1B) relating to default surcharge becomes redundant if inquiry is made at the end of every quarter.

    Rationale

    This amendment / addition to the existing provisions of advance tax estimates may lead to unnecessary harassment of the advance income Tax payers, who are usually from the organized corporate sector for the simple fact that it is totally impracticable to provide detailed documentary evidences of the ‘estimated expenses or deductions’ which are to happen in the future and have to be worked out by the tax payer based on the business forecasts and projections.

    Section 147(6), as amended vide Finance Act, 2018, also empowers the Commissioner to consider rejection of the estimate, if the above information is not made available by the tax payer; which is a very harsh and authoritative provision, since the tax payer is always in the best position to make their own estimates since he /she knows their business.

    Alternate Corporate Tax

    Under Section 113, corporates are subject to one of three income tax regimes-Alternate Corporate Tax (ACT), Minimum Turnover Tax or Normal Tax Regime.

    Proposal

    ACT is a major hindrance towards capital investment as newly incorporated companies or those companies, which make huge capital investments for expansion, extension or BMR are not practically able to get the benefits of initial allowance owing to the fact that such allowance is available only against the taxable income whereas in case of huge capital investment resulting in higher initial allowance and consequently lower taxable income, tax payer usually falls under the ACT regime against which the benefit of adjustment of initial allowance is not available.

    Rationale

    It results in triple jeopardy (after NTR and Minimum Tax under section 113) and is most likely to be not accepted by Court as only one capacity tax is possible as per the constitution read with SCP order in case of Elahi Cotton.

    Moreover, real benefit of initial allowance/ first year allowance is not available owing to the applicability of ACT.

    SRO 250 dated February 26, 2019

    SRO has been introduced for the electronic monitoring and tracking of the goods mentioned therein i.e. goods of tobacco, beverages, sugar, fertilizer and cement industries. Fee for the operation of this SRO will be recovered by the licensee (private firms) from the companies in the above mentioned industries.

    Proposal

    This SRO should be amended suitably to ensure that the Administrative cost of operation /activities in this SRO should not be borne by the manufacturers of goods.

    Rationale

    It is mentioned in the SRO that the cost of activities in relation to this SRO will be borne by the manufacturers of goods. This is against the main objective of the current government to provide ease of doing business for the manufacturing industries since, as per this SRO, the teams operating this electronic monitoring equipment will sit at the manufacturing premises of the companies and the cost of the operating such equipment along with licensee marking fee will be recovered from the manufacturing companies.

    Rule 43, Income Tax Rule 2002

    Presently the taxpayer has to deposit the withholding tax deducted fortnightly, i.e. within seven days from the end of each week ending on every Sunday.

    In addition, certain WHT agents do not deposit on time and some agents do not deposit at all. This also includes agencies /govt. Organizations in respect of WHT, where CPR is not provided hence revenue leakages to government in the absence of WHT deposit.

    On the other hand, where WHT is deducted by agencies /govt. Organizations but do not provide system (IRIS) generated CPR as they do not enter in the system. Therefore assesse cannot get input benefit due to non-availability of CPR from IRIS system on account of WHT in spite.

    Proposal

    Timeline of 7 to 13 days be extended to one week after the month. IRIS system should be applicable for all withholding agent including agencies /government organizations and CPR in respect of WHT Facing authority be available from IRIS.

    Rationale

    Ease of doing business and facilitate withholding tax agents. Control Revenue leakage as well assesse can claim input tax properly thus neither it is loss to authority nor the assesse. In the absence of non-availiblity of CPR, this is an extra cost for doing business.

    Section 8(1)(j)

    introduced through Finance Act, 2015, where in a restriction has been imposed on claiming input on services which are not allowed in provincial sales tax on services Act(s).

    Proposal

    Section 8(1)(j)of the Sales Tax Act, 1990 should be deleted.

    Rationale

    Since input tax sales tax on reduced rate services is not available for adjustment, this increases the cost of doing business. Currently there are more than 25 services under respective provincial sales tax on services Act(s).

    PBC is pursuing this matter with the provincial authorities also.

    Section 156-Prizes and winnings:

    Section 156 of the ITO 2001 requires a Company to deduct 20 percent tax on “prize offered by companies for promotion of sale”

    Prize and winnings-(1) Every person paying of prize bonds, or winning from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale to end consumers, or cross-word puzzle shall deduct tax…………..

    The clear intention of this section is to capture tax through withholding at source from persons who are recipients of these prizes or winnings; the intention is not to tax any person who belongs to the supply chain of the companies who offer prize for promotion of sales. The income of the supply chain i.e. dealers, distributors is subjected to withholding tax in the shape of withholding taxes imposed under separate withholding regimes. It is therefore suggested that to clear any ambiguity in law regarding application of this section, it may be amended to add the term “end consumers” to oust any person in the supply chain from the ambit of this section.

    Section 153(1)(a)

    Section 153(1)(a) withholding income tax on supplies by distributors of FMCG products is two percent for companies and 2.5 percent for others. This rate is quite high for industries dealing in bulk commodities/large volume but low margin products.

    Proposal

    Rate for withholding tax on FMCG distributors should be aligned with section 113 of the Income Tax Ordinance, 2001 i.e. Minimum tax on FMCG distributor is 0.2 percent.

    Rationale

    Current situation is leading to build up huge refunds / blockage of funds for the distributors since minimum tax charging rate is 0.2 percent whereas withholding is up to 2.5 percent.

    Due to amendments in the definition of withholding agents the tax withheld on the receipts of the distributors has increased significantly.

    Section 8B

    (1)Not withstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety percent of the output tax for that period.

    Proposal

    (1) Not withstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety-five percent of the output tax for that period.

    Rationale

    Will allow better management of cash flows

    Clause 18B of Part ii of the Second Schedule-Tax credit for Shariah Complaint Companies.

    Income Tax Ordinance on the one hand requires the corporate sector to fulfill the prescribed Shariah compliance criteria approved by SECP (as per Clause 18B of Part ii of the second schedule to the Tax Ordinance) whereas, on the other hand, Income Tax Rules, as prescribed by FBR (via Rule 231H )still remain applicable and are in conflict with the SECP Regulations.

    Further, Clause 18B of Part ii of the Second Schedule is reproduced below:

    The rate of tax as specified in Division II of Part I of the First Schedule shall be reduced by 2 percent in case of a company whose shares are traded on Stock Exchange if :

    (a)it fulfils prescribed Shariah compliant criteria approved by State Bank of Pakistan, Securities and Exchange Commission of Pakistan and the Board;

    (b)derives income from manufacturing activities only.

    (c)has declared taxable income for the last three consecutive tax years.

    (d)has issued dividend for the last five consecutive tax years.

    Proposal

    Since the SECP has notified Regulations for Shariah Compliant Companies, Rule 231H should be deleted.

    Further, Clause 18B be amended as below :The rate of tax as specified in Division ii of Part I of the first Schedule shall be reduced by 2 percent in case of a company whose shares are traded on stock exchange if:

    (a) it fulfils prescribed Shariah compliant criteria approved by Securities and Exchange Commission of Pakistan.

    (b) derives majority or more than 50 percent income from manufacturing activities.

    Rationale

    SECP being the Regulatory Authority for legislation and promulgation of Companies governance laws in Pakistan, holds the right infrastructure including a Shariah Compliance Department and the expertise to determine and regulate compliance with Shariah governance regulations, 2018.

    Reduced Rate of WHT on Export Proceeds

    At present, rate of tax deduction on export proceeds under section 154 is 1 percent which is same as for five export oriented sectors as well as for other than five sectors.

    Proposal

    In order to promote diversification of exports instead of relying on only five specified sectors, rate of tax on export proceeds should be reduced to 0.5 percent from 1 percent for sectors which are not covered under the five specified export oriented sectors.

    Rationale

    At present, sales tax 0 rating is available to five specified export oriented sectors on their input materials whereas such benefit is not available to other potential export sectors. Moreover, gas supply is also available to five specified sectors @ 600/MMBtu whereas rate of gas per MMBTU for non -conventional sector is Rs. 780 in addition to GIDC, which make potential export uncompetitive and consequently, Pakistan is unable to diversify export markets. In order to compensate such exporters and to promote export of other than five sectors, rate should be decreased to 0.5 percent for such sectors.

    Manufacturing Bond /DTRE rules are cumbersome and in certain cases lack clarity whereby many potential exporters can not avail them. Consequently, it results in LOST EXPORTS.

    Proposal

    Manufacturing bond/ DTRE rules need to be modified to make it easily accessible and lend full clarity to allow exporters to fulfill potential export orders.

    Rationale

    To increase exports by facilitating existing and potential exporters.

  • Smuggling through ATT biggest threat to economic growth: PBC

    Smuggling through ATT biggest threat to economic growth: PBC

    KARACHI: Pakistan Business Council (PBC) in its budget proposals 2019/2020 has said that smuggling through Afghan Transit Trade is the biggest threat for economic growth of the country.

    “Smuggling through Afghan Transit Trade has always been the biggest threat for economic growth and hardly any sector has been left untouched by this menace,” the council said.

    Smuggled goods through the borders of Afghanistan, Iran, China, India and the Afghan Transit Trade from a chunk of the informal economy, volume of which ranges between 50-60 percent of the formal economy, the PCB said.

    “It is costing the national exchequer in billions. Markets across the country are flooded with smuggled goods and local industries are struggling for survival as smuggled goods are not only easily available everywhere but are also attracting the buyers who prefer foreign merchandise,” it said.

    The PBC suggested that goods moving under Afghan Transit Trade (ATT) from Pakistan to Afghanistan should be charged with duties and taxes under the Pakistani laws and the same should be transferred to Afghan government.

    Secondly, the duties and taxes so paid should be deposited with the State Bank in the US Dollar. Further, a quantitative restriction should be applied on goods moving under ATT on the basis of consumption.

    Giving rationale of the proposal, the PBC said that it would allow industry to fairly compete with unscrupulous imports, government to benefit from increased revenue.

    The PBC also suggested rationalizing import tariff to promote domestic manufacturing.

    The council said that the tariff structure had been distorted due to constant changes in the duty rates, the tariff structure was originally designed to support domestic manufacturing, however, changes in rates of import duties coupled with imposition of regulatory duty had led to situation where the tariff on finished products was less than that on the raw or intermediate goods.

    It said that a detailed tariff exercise with the objective of rationalizing the duty structure to promote domestic manufacturing was underway. Therefore, industry needs to be taken into confident in this matter.

  • PBC suggests measures for broadening tax base by enhancing withholding tax rates on non-filers, unregistered persons

    PBC suggests measures for broadening tax base by enhancing withholding tax rates on non-filers, unregistered persons

    KARACHI: Pakistan Business Council (PBC) has suggested measures for broadening tax base through enhancing withholding tax rates on non-filers and unregistered persons in various sectors.

    The PBC – the advisory council of large corporate entities – in its budget proposals for 2019/2020 said that the concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy.

    “Though large amounts are being collected from non-filers, no effort has been made to increase the tax base. The non-filers for the most part have build the cost of this government levy into pricing and passed it on to their customers.”

    The PBC said that in order to broaden the tax base and to achieve increase in overall tax collection without burdening existing taxpayers, the policy to increase tax on non-filers / unregistered persons should be implemented specifically in the following cases:

    a. unregistered industrial / commercial entities (not having STRN) having bill amount in excess of Rs20,000 per month, extra sales tax should be increased from five percent to 20 percent.

    b. After collection of extra tax for a continuous period of six months, all these connections should be provisionally converted into NTN and STRN and return filing from these connections should be enforced.

    c. In case of provisional registration, utility companies should be directed to issue show cause notices where annual billing amount exceeds Rs2.4 million and directing provisionally registered persons to obtain permanent registration. In case of non-compliance, utility companies should be directed to disconnect utility connections.

    d. Moreover, in order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with electricity distribution companies. In case of failure to provide NTN, electricity connection should be disconnected. Considering the fact that all industrial/commercial connections will be linked with NTN, the tax department will then be in a better position to assess the electricity consumed by commercial/industrial users and corroborate the same with amount of sales/ production etc. reported in sales tax/income tax return.

    e. In order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with them. Thereafter, such commercial / industrial consumers without NTN should be charged advance income tax at 30 percent (from existing 12 percent) on their utility bills. Those with NTN but non-filer status should be charged at 20 percent withholding tax.

    f. Residential consumers should be made liable to provide NTN in case of electricity bill amount exceeds Rs1.2 million per year or levy advance income tax withholding of 20 percent.

    g. All exemption (like exemption on agriculture income) under the income tax law should only be made available to filers so that exempt income is also reported and wealth is reconciled.

    h. withholding tax on international business class tickets under Section 236L is same Rs16,000 for filer and non-filer, it should be increased to Rs50,000 for non-filers.

    i. Withholding tax at five percent or Rs20,000, whichever is higher, is applicable under Section 236D on all functions organized by filers as well as non-filers. Rate of withholding should be increased for non-filers to Rs100,000 as minimum and no withholding tax from filer.

    j. Function halls withholding tax on electric bills should be 30 percent which can be adjusted against tax liability by providing proof of tax deducted from their customers.

    k. Withholding income tax on interest income under section 151 of Income Tax Ordinance, 2001 is 10 percent for filer and 17.5 percent for non-filer. Rate should be increased to 30 percent for non-filers.

    l. Annual private motor vehicles tax under section 234 of the ordinance for non-filers is Rs15,000 for 1600 cc-1999cc and Rs30,000 for 2000cc and above. Rate for non-filers should be increased to Rs50,000 for 1600cc – 1999cc and Rs200,000 for 2000cc and above.

    m. Advance income tax is collected on sales of immovable property under Section 236, which is 2 percent for non-filers, should be increased for non-filers to 10 percent for properties of 900 square yards or more.

    n. Purchase of land (above specified limit) is only allowed by filers, however, holding of land and its sale by non-filers is still allowed. Holding of land by non-filers should be made more expensive by asking those authorities collecting property tax (cantonment boards/ societies/ registrars) to collect adjustable advance income tax, form non-filers, on behalf of the federal government as: Rs500,000 per year for 800 yards or more but less than 1800 yards; Rs1 million per year for 1800 yards and above.

  • Commercial importers destroying domestic industry: PBC

    Commercial importers destroying domestic industry: PBC

    KARACHI: Pakistan Business Council (PBC) – the advisory forum of large corporate entities – has said that commercial importers are involved in massive under-invoicing and they are destroying the domestic industry.

    In its budget proposals for 2019/2020, the PBC recommended measures for documentation of economy to providing level playing field for domestic manufacturing.

    The PBC said that across the board massive under-invoicing and dumping of imported products had been increasing. “Information regarding values at which various customs check post clear import consignment is not publicly available. This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues,” it added.

    It also pointed out that there are massive leakages in Afghan Transit Trade (ATT) and smuggled goods are being openly sold in all major shopping centers of the country. “Customs however is not willing to act against smuggled products citing lack of cooperation from local authorities,” it added.

    The PBC recommended:

    a. values at which import shipments are cleared through PRAL or CARE need to be publicly available.

    b. The government of Pakistan must insist of Electronic Data Interface (EDI), initially for both Free Trade Agreement (FTA) and non-FTA from China. “In future the requirement of EDI should be made compulsory for imports from FTA/ PTA partner countries.

    c. Depending on industry, the import trade price (ITP) should be fixed e.g. on the basis of country of origin, weight, volume etc. after discussion with stakeholders. “ITP’s may be fixed for most items prone to mis-declaration such as consumer goods and margins of commercial importers should be monitored to assess the value of subsequent supply of imported goods. A certificate to this effect should be issued by auditors of commercial importers.”

    d. For items, prone to under invoicing and mis-declaration, Federal Board of Revenue (FBR) should designate one or two ports (including the dry ports) for clearing of import consignments. “This will allow better monitoring of the import consignments where chances of mis-declaration are on a higher side.”

    e. Additionally, the old Customs General Order 25 should be revived with a provision that local manufacturer should be given the option to buy at a 15 percent premium, any consignment which appears undervalued.

    f. Taxes and duties deposited local manufacturers and commercial importers should be published.

    g. The rate of tax collected from commercial importers should be maintained at their current level. Presently, tax collected from commercial importers is treated as final tax. The income tax collected at import stage should be treated as advance tax.

    h. Commercial importers should be required to file returns under the normal tax regime as introduced through the Finance Act, 2018.

    i. In order to allow commercial importers to claim adjustment of tax deducted at import stage, commercial importers should be asked to present certificate from auditors that at least 70 percent of imported items have been exported or soled to registered manufacturers. “This will also help increase the overall tax base,” the PBC said.

    j. Monthly sales declared by commercial importers should be matched with sales declared in annual income tax returns as well as the credit entries in all business bank accounts. “In case of any discrepancy, a reconciliation with justifiable reason should be submitted by the commercial importers.

    k. Online CREST system must be amended in a way to trace sales along with value addition thereon of person to whom supplies were made by commercial importers.

  • PBC resents restoration of final tax regime for commercial importers

    PBC resents restoration of final tax regime for commercial importers

    The business association representing multinational companies (MNCs), the Pakistan Business Council (PBC), has strongly criticized the proposed restoration of the Final Tax Regime (FTR) for commercial importers, urging the government to reconsider its decision. The PBC’s concerns were voiced in response to the Finance Supplementary (Second Amendment) Bill of 2019.

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