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  • 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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