Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

KARACHI: The foreign investors and multinational companies have suggested the government to demonetize high denomination currency notes to eliminate parking lots for untaxed funds.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 suggested measures to eliminate legally permissible ‘parking lots’ for untaxed funds.

The OICCI – representative body of foreign investors in Pakistan and multinational companies – suggested that defective mode and manner of valuation of immovable properties should be addressed. “Registration of sale and purchase of real estate should only be on fair market value at the time of the transaction,” it suggested and said necessary information on market value of real estate can be easily obtained.

It further suggested that sale of all kinds of bearer securities, prize bonds, and other such items should be stopped.

Appropriate restrictions should be imposed on the hoarding of foreign currencies.

“High denomination currency notes should be demonetized.”

The OICCI also suggested introduction of books of account and cash registers.

The Federal Board of Revenue (FBR) does not have any proper shop-wise record of approximately 35 million SMEs, which are mostly sole proprietorship or partnerships, despite the fact that jurisdictions within the tax offices are location centric, especially for small and medium sized businesses.

It should be made mandatory for all businesses to maintain books of account and taxes should be levied on ‘net income’ basis only.

Registration of all retail outlets and electronic cash registers should be made mandatory without any turnover thresholds, which gives rise to tax evasion.

The installation of these registers should be inspected regularly by tax inspectors.

The FBR should engage with representatives of small manufacturers, wholesalers and retailers and ensure their buy-in for introduction of these documentation measures so that the previous back-tracking on these actions is not repeated.

The book keeping requirements /outline be regularly upgraded considering the best practices learnt from other neighboring countries in the region with similar business infra-structure.

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