Karachi, May 14, 2014 (PPI-OT): All Chambers of Commerce and Industry and trade associations across the country have unanimously urged the government to reduce direct and indirect tax rates in the forthcoming budget, besides implementing drastic changes in tax policy of the country in order to bring new taxpayers into the net and narrow the budget deficit.
All Chambers of Commerce and trade associations of Pakistan in their Joint Budget Proposals for Federal Budget 2014-15 asked Federal Board of Revenue (FBR) to bring in new taxpayers, which will consequently broaden the tax to GDP ratio and narrow the budget deficit so that the country no longer needs and depends on foreign and domestic borrowing.
All Chambers of Commerce and trade associations in all five provinces of Pakistan united under one roof at 1st All Pakistan Chambers’ Pre-Budget Conference organized by Karachi Chamber in the month of February 2014 in which all Chambers’ Presidents agreed to formulate a comprehensive document carrying joint budget proposals of various chambers.
KCCI, under the supervision of its President Abdullah Zaki, Senior Vice President Muffasar A. Malik, Vice President, Muhammad Idrees, Chairman Budget Committee, Qamar Usman and Chairman Taxation Sub Committee KCC, Hassan Sheikh Vohra, compiled budget proposals of all Chambers of Commerce on independent and equitable basis, which were thoroughly examined and finalized by Presidents of all chambers at 2nd All Pakistan Chambers’ Presidents Pre-Budget seminar organized by Faisalabad Chamber in the month of April 2014.
All Chambers’ Budget proposals have been sent to the policymakers so that a pro-business budget is unveiled this year as per aspirations of the entire business community of Pakistan. According to Joint Budget Proposals, taxpayers expect from FBR, a level of service that they receive from the very best of the private sector and multinational service industry.
The taxpayer service delivery function nowadays plays a crucial role in the administration of the tax legislation in all countries. Prevailing services that are user-friendly, in the sense of being accessible and understandable for all, helps to maintain and strengthen the taxpayers’ willingness to comply voluntarily and thereby contribute to improvement in overall levels of compliance with the laws.
No amount of effort will generate or improve the tax revenue collection, until and unless all incomes above the minimum threshold of Rs400,000 are taxed, irrespective of the source. Currently huge incomes from agriculture, professional services sector and influential remain untaxed. Firm steps are needed to recover the tax from all these areas.
Agriculture income is a convenient means to conceal income generated from all other sources, for the documentation and taxation, income from every segment including agriculture should be taxed, NTN must be mandatory for all sectors and they must be asked to file income tax returns.
In the last few years, Industry and Trade in the private sector has suffered setbacks because of the high cost of doing business mainly due to industrial inputs including raw materials, Gas, Electricity, Manpower and high cost of working capital, which has made life difficult for many industries to survive and run profitably.
Joint Budget Proposals document recommends to revise Tariff mix for industrial undertakings. It should be reviewed and brought down and fixed at least for 1 year. At import stage the accumulative sum of all taxes (including sales tax and income tax), customs and regulatory duties and levies should not anyhow exceed 30% of the value of goods. While, the Raw materials and machinery should be in a slab of 5 percent with zero rating on raw material used in exports.
Since 65% of the sales tax collection and revenue is collected at import stage, it has become a fixed tax and levy instead of value addition tax, increasing the incidence of under invoicing and smuggling by some unscrupulous elements.
As total incidence of customs duty, sales tax, income tax, FED and regulatory duty could sometime go as high as 70-80% of the value of import in certain cases. Customs duty slabs should be simplified with 4 slabs of zero percent, 5 percent, 10 percent and maximum 15 percent.
Rates of GST and Income Tax be brought down to a maximum of 12.5% (inclusive of Value Addition Tax) and 30% for corporate and 20% for small companies having turnover of Rs.1.0 billion respectively. This will provide relief to trade and industry and gradually to be brought down to single digit for sales tax and 25% for corporate income tax, respectively. Moreover, Rate of 5% Sales Tax for life savings and essential goods, and good which are smuggling prone.
A special fund of Rs.50 billion should be created in the upcoming budget to provide timely refunds to the exporters of Pakistan who are earning precious foreign exchange revenue to the national exchequer. Withdrawal of application of section – 236 G and H of the income tax ordinance, 2001 has been recommended as it burdens the industry to withhold taxes.
S.R.O providing unnecessary benefits to specific sectors by pressure of vested interests and influential groups, individuals, businesses or sectors should be withdrawn immediately. However, S.R.O granting exemptions to basic needs, humanitarian and public welfare should be retained with effective monitoring mechanism.
Government should support development of self-sustained industrial zones run by private entrepreneurs, and also allow already existing Export Processing Zones to export 40% of their production to Pakistan Tariff Area, after paying all duties and taxes, against US$.
Law of Income support levy is discriminatory in nature as it is based on the principal of double taxation and therefore it must be withdrawn in the new budget 2014-15. Effective zero rating for all export sectors be implemented, so that cash flow are not stuck up in refunds.
In the STPF 2012-15, the government has already agreed to set up institutions like an Export-Import (Exim) Bank and other institutions. Therefore, government should create EXIM Bank with an initial capital of Rs20 Billion for the development and financing of export and for leasing of capital goods at low interest rates to export industries with the consultation of stakeholders to double the export in 5 years’ time.
Commercial importers are paying high value addition tax at import stage @ 3%, therefore a fair and equitable tax structure and policy be adopted to provide a level playing field. They are also source of raw materials supply to 80,000 SMEs.
Therefore, it is recommended that Rule 58E of The Sales Tax Special Procedure Rules 2007 should be reinstated to provide immunity of Audit to commercial importers since advance value addition tax are already been paid by them.
There is an unutilized fund of approximately Rs.19.64 billion from EDF till 2012-13. Therefore, substantial resources and government support should be employed from the fund available for benefit and growth of Exports. Income tax and sales tax return should consist of 1 page so that possibility of online submission be made possible even by small retailers.
FBR should develop a performance evaluation mechanism for its departments in terms of delivery of service to the taxpayers in key areas of Customs clearance, Valuation, Filing of returns, Audit, Appeals and Adjudication, Refunds and overall taxpayers’ satisfaction, establishing parameters and timelines with taxpayers’ consultation.
Adjustment of provincial input tax should be available with FBR and vice versa. Time period of input tax adjustment should be increased to 12 months U/S 7 of The Sales Tax Act, 1990. Customs Valuation Rulings must be posted on FBR website and implemented across the country on all dry ports as well.
All Customs data as shipment value / ATT for all ports must be available online to curb under invoicing. If Commissioner Appeals has not passed an order within prescribed time period, automatic stay of demand is considered to be granted.
All ports (including dry ports) should remain open on Saturdays as well as the relevant FBR offices and Banks responsible for collection of duties and taxes. Taxpayers are unable to get credit of Income Tax and Sales Tax withheld on utility bills due to technical reasons i.e. ownership issues, lack of synchronization between FBR and entities issued with FTN.
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