Tag: PTBA

KARACHI: Pakistan Tax Bar Association (PTBA) has recommended abolishing 12 different provisions of withholding income tax in order reduce the cost of business.

The apex tax bar of the country in its tax proposals for upcoming budget 2019/2020 recommended rationalization of withholding tax regime and in the first step it suggested eliminating 12 withholding tax rates.

The PTBA said that withholding tax regime significantly impacts the taxpayers and Inland Revenue Officers (IRO) alike.

On one hand, the regime increases the cost of doing business for a taxpayer and, on the other hand, it forces IROs to devote numerous resources in monitoring of withholding taxes.

The monitoring of taxes’ goal can be achieved by out sourcing the professional auditor firm and ability of the officer may be used for other work.

Even with the best efforts of the IROs, it is practically impossible to plug all the leakages of taxes withheld and deposit into the national exchequer.

“Globally the withholding tax regime is only applicable to persons whose income is difficult to determine, easier to evade or more likely to cross national boundaries. Currently, in Pakistan, withholding tax regime has been made applicable to almost all the categories of taxpayers and nature of payment under 49 provisions of law been weaved into the indirect taxes,” the PTBA said.

PTBA recommended revamping and rationalize of Withholding Tax Regime in order to reduce cost of doing business, complexity in the taxation laws and leakages in tax collection.

As a first step, it recommended following provisions of law may be withdrawn in which no substantial revenue is being collected in the last three years and eight months of current fiscal year:-

 

Sr. No.	Section	Description	2018-19 [Estimated on the basis of actual up to March, 2019]	2017-18	2016-17	2015-16
01	156B	Withdrawal of balance under Pension Fund.	100	136	86	76
02	235A	Domestic electricity consumption.	917	792	312	1,730
03	236B	Advance tax on purchase of air ticket.	559	484	303	495
04	236D	Advance tax on functions and gathering.	965	839	783	622
05	236F	Advance tax on cable operators and other electronic media.	49	24	19	21
06	236J	Advance tax on dealers, commission agents and arhatis etc.	136	123	123	109
07	236L	Advance tax on purchase of international air ticket.	1,131	1,257	1,331	999
08	236Q	Payment to resident for use of machinery and equipment.	644	619	328	174
09	236R	Collection of advance tax on education related expenses remitted abroad	543	397	339	367
10	236S	Dividend in specie.	3	20	452	623
11	236U	Advance tax on insurance premium.	424	485	397	–
12.	236V	Advance tax on extraction of minerals.	–	0.1	–	–
Total	–	–	–	–

 
 

KARACHI: Pakistan Tax Bar Association (PTBA) has suggested the Federal Board of Revenue (FBR) to outsource the preparation of profiling potential taxpayers to a data mining company for broadening of tax base.

The PTBA in its tax proposals for budget 2019/2020 suggested the tax machinery that the assignment of preparation of profile of potential taxpayers/registered person be out sourced to a data mining company in line with the responsibility of collection of tax on capital gains given to the National Clearing Company of Pakistan.

“This company should only be allowed to collect the following information and present the potential taxpayer’s profile to the FBR’s BTB department to take appropriate action in accordance with law.”

The PTBA said that Pakistan was facing a challenge with regards to the widening of the current tax base to prevent tax-revenue erosion.

Although in the current year number of Active Taxpayer has improved; however since many years, Pakistan’s registered tax base has been more or less stable at less than 1 percent of the total population.

Over the last few years, the concept of filers and non-filers has been introduced in order to encourage increased filing of returns of income.

However, such amendments have not been able to increase the tax base by many folds as envisaged.

On the other hand has increased the burden of withholding agents by prescribing different withholding rates based on the Active Taxpayers List without achieving any significant progress inroads on the actual tax compliance rates.

In reality bulk of the increased cost due to higher tax rates for non-filer, has been passed on by the unregistered persons to the end consumer by enhancing cost of goods /services to gross up the impact of higher withholding.

The PTBA also proposed that a new team comprising of young IT expert, Accountants and Tax experts should be hired for BTB department.

A task force comprising of independent professionals and top officials be formed to monitor the work assigned to the data mining company and ensure that the BTB department operates efficiently and effectively to ensure the progress in broadening of tax base activity by FBR.

The effective enforcement should be made in accordance with Section 114 of the ITO. The government and FBR on its part should ensure that the relevant provisions of law are implemented in letter and spirit without any distinction on the basis of cast, creed, color and clout to achieve the goal of broadening the tax base.

A complete profile consisting of CNIC, Firm/Company registration-wise of the taxpayer may be prepared generated by maintaining a data base of all the:-

Owners and holders/allottee of the industrial, commercial, residential and agriculture properties;

Private motor vehicles;

Club membership;

International traveling;

Utilities;

credit cards;

investment in bank deposits;

Investment in national saving schemes;

investments in Capital Market; and

Major expenditure (i.e. Rs.300,000/- & above) incurred on account of hospitalization, parties at hotels and schooling of dependents.

Submission of quarterly statements by the Registrars & Housing Societies for registration/transfer of Immovable Property (Industrial Commercial, Residential & Agricultural), Motor Vehicle Registration Authorities, Clubs (Private & Public), Credit Card issuing authorities, Central Depository Company, National Clearing Company of Pakistan, large scale private hospitals, hotels & schools and Financial Institutions distributing profit more than statutory taxable limit or granted commercial loans, should be made mandatory.

Jurisdiction other than Company should, for some time, be reverted strictly to geographical basis to avoid duplication and slippages of potential tax filers.

Tax credit at the rate of 5% be restored and provided to those taxpayers whose 90% Sales and Purchase of Goods are from persons who are registered as Sales Tax and Income Tax taxpayers.

The PTBA said that the proposed amendments would result in increased visibility of potential taxpayers and incentivize registration with the tax authorities without increasing the burden on existing taxpayers.