Pkrevenue.com

Tag: PBC

  • Massive under-invoicing by commercial importers destroying domestic industry: PBC

    Massive under-invoicing by commercial importers destroying domestic industry: PBC

    KARACHI: Pakistan Business Council (PBC) has said that massive under-invoicing especially by commercial Importers is destroying domestic industry.

    In its budget proposals for fiscal year 2020/2021, the PBC said that across the board massive under invoicing and dumping of imported products has been increasing.

    Information regarding values at which various custom check posts clear import consignments is not publicly available.

    “This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues.”

    There are massive leakages in the 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.”

    In order to resolve the problems, the PBC proposed following:

    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 Interchange (EDI), for both FTA and non-FTA imports 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) 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 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, 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 needs to be revived with a provision that local manufacturers be given the option to buy at a 15 percent premium, any consignment which appears undervalued.

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

    g) The rate of tax collected from commercial importers be increased by at least by 2 percent. Presently, tax collected from commercial importers is treated as an advance tax. Final Tax.

    h) In order to allow commercial importers to claim adjustment of taxes 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 sold to registered manufacturers. This will also help increase the overall tax base.

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

    j) 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.

    Transparency in collection of taxes will discourage mis-declaration, measures to discourage evasion of taxes and duties will help industry to fairly compete with unscrupulous imports and also Government stands to benefit from the increased indirect taxes revenues.

    It will also help in accountability of the customs staff and will reduce the incidence of Customs Duty & Sales Tax evasion and increase government revenues.

    The proposed change will help in boosting the manufacturing base of Pakistan, the PBC added.

  • FBR proposed to review regulatory duty regime to promote domestic industry

    FBR proposed to review regulatory duty regime to promote domestic industry

    KARACHI: Business community has urged the Federal Board of Revenue (FBR) to review existing regulatory duty regime in order to promote domestic industry.

    Pakistan Business Council (PBC) in its budget proposals 2020/2021 advised the FBR to review of the regulatory duty where domestic industry can expand and market its capacity to the export markets.

    The PBC supports the government’s resolve to simplify, reduce and introduce cascading tariffs to promote industry.

    However, at a time of global recession when many overseas producers will be looking to find markets, we urge the government to factor this into its tariff review to protect jobs in Pakistan.

    Unless there is very strong anomaly, we recommend that present tariffs be maintained in order to preserve scale and competitiveness of domestic industry.

    Moreover, the DTRE scheme should be simplified for SMEs to avail.

    The PBC strongly advocates that the Finance Bill 2020 has a bias in favor of the manufacturing sector as a recovery in the manufacturing sector will have a multiplier effect of the economy.

    The PBC continues to advocate that taxation needs to be based on the principle of “all income irrespective of source should be taxed & all taxpayers must file tax returns”.

    The PBC and its members also firmly believe that the fiscal space that the government is looking for to implement its ambitious socio-economic agenda will not, and cannot be provided by continuing to increase taxation on the already taxed sectors of the economy.

    The taxation base needs to be widened through better documentation by bringing the under taxed, and the currently exempt sectors in the tax net.

    The current tax policies are leading to a reduction in investable surpluses for the corporate sector. The short-term revenue enhancement measures pursued by FBR in the recent past have acted as a disincentive to not only re-investments by existing units but have also acted as a deterrent to fresh investments in industry and the formal sector.

    Last year, the PBC welcomed the government’s policy announcement to separate tax policy and tax administration, it is however disappointed with the pace of implementation of this decision and urges the government to move on this front to create taxpayer confidence in the tax machinery.

    The laws on Group Taxation & Group Relief and the Alternate Corporate Tax (ACT) need to be addressed to create an investor friendly environment in the country.

    The arbitrary & non-transparent implementation of tax laws by FBR functionaries in their zeal to achieve unrealistic revenue targets is severely impacting the viability of the formal sector.

    The continued failure of the FBR to use data-mining to identify those who are either not paying or underpaying their dues is also an area of concern for the formal sector.

    There is blatant misuse of the Afghan Transit Trade continues, wholesale and retail markets all over Pakistan are flooded with smuggled products, however despite having the jurisdiction to act against the open sale of smuggled products, the FBR continues to hide behind such flimsy excuses like “lack of support from local administration.”

    The revenue leakages in the Customs department need to be plugged, Electronic Data Interchange (EDI) with China needs to be fully implemented.

    The Afghan Transit Trade needs to be better monitored, one measure could be the collection of all dues which are payable by importers in Pakistan and refunding the same once the shipment has conclusively entered Afghanistan.

    The PBC appreciates that the government managing the economy under an IMF program and at the same time managing the expectations of a nation reeling under the impact of the COVID-19 pandemic does not have the fiscal space to provide major incentives, however, it also believes that it is the government itself which through its policies can create the space that it requires to implement its social agenda.

  • Revival of sales tax zero rating suggested to ease liquidity problem

    Revival of sales tax zero rating suggested to ease liquidity problem

    KARACHI: Business community has recommended revival of zero rated sales tax for the export sector in the wake of difficulties faced following COVID-19.

    Pakistan Business Council (PBC) has suggested sales tax proposals for budget 2020/2021 to ease the pressure on the industry.

    It said that the proposal for bringing the five export sectors under the ambit of normal sales tax regime has clearly not worked.

    Sales tax refund claims continue to accumulate with the FBR while export industries have faced massive liquidity in the past nine months on account of this move.

    Exporters liquidity as well as net operating results / losses have taken a strong negative hit from the two-edged sword; once after withdrawal of zero rating regime resulting in piling of sales tax refunds and thereafter, due to cancellation of existing orders post the COVID-19 pandemic.

    Restoration of Zero rating will allow some relief on the liquidity front for the major export sectors

    It further said that at present, local sales to DTRE license holder has been provided the benefit of sales tax zero rating, however, local supplies to EOUs / manufacturing bond is chargeable to sales tax at 17 percent, which is an apparent anomaly between the DTRE, EOUs and Manufacturing bond rules.

    In order to remove anomaly and considering the fact that material / goods being purchased by DTRE / EOU / Manufacturing Bond are used for the purposes of exports and are subject to strict scrutiny, it is proposed to allow zero rating on local purchase of goods by EOUs / Manufacturing Bond in line with the benefit given to DTRE.

    Under the Sales Tax Act, Section 8 – B, a company is not allowed to adjust input tax in excess of 90 percent of the output tax for that period. Further, commercial importers paying 3 percent minimum Value Addition sales tax at import stage are totally exempt from the applicability of minimum tax under section 8B.

    All manufacturers be allowed 100 percent adjustment of input tax instead of the current restriction of 90 percent

  • 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.

  • PBC demands suspending collection of Sindh infrastructure cess

    PBC demands suspending collection of Sindh infrastructure cess

    KARACHI: Pakistan Business Council (PBC) has demanded the Sindh government of suspending collection of infrastructure to provide relief the industrial and businesses in the wake of coronavirus outbreak.

    In a letter sent to Sindh Chief Ministry Syed Murad Ali Shah, the PBC demanded the suspension of collections under the Sindh Development and Maintenance of Infrastructure Cess Act, 2017.

    The PBC is composed of country’s leading employers, including multinationals. PBC members, directly and through members in their value chains provide employment to more than two million individuals.

    The COVID-19 pandemic has severely impacted liquidity of businesses in Pakistan including those operating in Sindh.

    While PBC members are committed to retaining their direct employees and are also taking steps to ensure that livelihoods of employees in their supply chain are not adversely impacted, they do however, look towards governments for the maximum help to ensure that liquidity is available to pay these unusual expenses.

    “We are therefore writing to request you to initially suspend all collections under the Sindh Development & Maintenance of Infrastructure Cess Act 2017 till June 30, 2020. The exemption may be reviewed in June and extended if the crisis persists,” it said.

    The government of Punjab on April 02, announced the suspension of collections under the Punjab Infrastructure Development Cess Act 2015 till June 30th, 2020.

    The PBC hopes for a similar gesture from the Government of Sindh and requests that the announcement for the suspension of collections under the Sindh Development & Maintenance of Infrastructure Cess Act 2017 be made at the earliest.

  • 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.

  • 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.