ICAP suggests measures for tax base enhancement

KARACHI: The Institute of Chartered Accountants of Pakistan in its budget proposal has given a roadmap to broaden tax base, facilitate already registered taxpayers, abolish tax amnesty schemes and improve governance in FBR.

A Pre-budget seminar was organized by ICAP in Karachi Mr. Syed Ayaz Mehmood, Chief Commissioner (Inland Revenue), Large Taxpayer Unit Karachi, Federal Board of Revenue was the chief guest.

With reference to direct taxation, Mr. Asif Haroon, FCA, Member, ICAP Taxation Committee, said that ICAP has recommended that tax policy board should play its role in formulation of fiscal policy as a support to legislative function; and act as an oversight over the performance of the FBR. ‘Only Minister for Planning from the cabinet should be the member of board whereas rest of the board should comprise of representatives of major stakeholders viz. FPCCI, economists, Institute of Chartered Accountants of Pakistan etc.

It was suggested that tax structure should be reformed that ensures avoidance of multiple taxation by Provinces and / or Federal Government.

While talking about policy reforms in appellate forum, Asif Haroon said ‘Appeals should be brought under the administrative control of Federal Ministry of Law and the Appellate Tribunal under the control of the High Court of the respective jurisdiction; No recovery of tax demand be created till the decision of Commissioner-Appeals; Officers of the tax department should not be appointed as judicial members of the Appellate Tribunal’. ‘For policy reforms in governance, there should be speedy process of registration, particularly for non-residents and also speedy process for application of condonations / seeking clarifications’, added Mr. Haroon.

He said that the government should make policy that makes accountable high handedness of Tax Officer; exorbitant demands; coercive measures for recovery.  Similarly, weak officers should not be posted at CIR-Appeals and ATIR Appellate Tribunal Inland Revenue. In addition to that he said that excess taxes paid should be promptly refunded and amnesty schemes for non-compliant should be stopped. ’The tax officer should be made accountable if order does not stand test of appeal’, he proposed.

‘In order to broaden tax base industrial consumers of electricity and gas who are un-registered / non-filer must be identified. Withholding tax on natural gas consumption by industrial and commercial consumers should be introduced. Identification of  unregistered Wholesaler / Retailers, services providers and real estate dealers / developers, in liaison with provincial governments, who actually possess physical and business data of these sectors’, he added.

Likewise, the state should utilize data of tax withholdings (including ST withholding) of unregistered / non- filers to register unregistered businessmen. ‘Permanent tax evasion and amnesty scheme provided under Section 111(4), if cannot be abolished, should be made conditional i.e., it should be restricted to remittances by an overseas non-resident Pakistani to a relative with monetary limits and for the purpose of investment in industrial undertaking in Pakistan’ he added.

He further added ‘under-invoicing should be tackled on emergency basis and all data of Customs at FBR should be automated. Tax credit under section 65A available manufacturers may be extended to other persons as well and tax credit should also be given on purchases if these are made from registered suppliers/ service providers. Corporate tax rate need to be reduced to 25 percent in line with rate applicable in region. Tax on bonus share should be abolished as the shareholder does not derive any income from the receipt of bonus shares. Tax credit of 20 percent should be also allowed in two yearsafter the year of enlistment. Corporate tax rate for banks of 35 percent should be brought at par with corporate tax rate applicable to other companies to bring harmony and level playing field’.

Mr. Asif Haroon recommended that Dual Taxation should be avoided – FED and Provincial Taxes e.g. Toll manufacturing. Resolve Origination or Termination issues. Withholding tax on indirect taxes should be abolished. There should be a single indirect return with identification of Federal and Provincial head of account and direct deposit of share of tax of each province; and there should be directorate of audit with representation from each province and FBR.

While talking about Indirect Taxation Mr. Asif S. Kasbati, FCA, Member, ICAP Taxation Committee, highlighted 5 major steps to resolve the matters; Avoid Dual Taxation – FED and Provincial Taxes e.g. Toll manufacturing;  Resolve Origination or Termination issues; Withholding tax on indirect taxes should be abolished; Single indirect return with identification of Federal and Provincial head of account and direct deposit of share of tax of each province; One directorate of audit with representation from each province and FBR. ‘To avoid double taxation, for simplifications, reduce cost of doing business and industrial growth’, he explained the rationale behind his proposition.

While talking about standard tax rate reduction, he said ‘Lower tax rate will Promote Registration and documentation’.  In order to promote registration and dealing with registered sector, he recommended that extra incentive may be offered to the registered persons, if they deal with registered person; this may be in the shape of fixed or variable tax credit(s) at the end of the year, like in IT Law.

The chief guest; Mr. Ayaz Mehmood, Chief Commissioner Inland Revenue Large Taxpayers Unit, Karachi,  appreciated the efforts of ICAP members and said that the Govt alone cannot achieve the goals and it is the private sector whose help has always been acknowledged by FBR on different initiatives.

He said that most of the suggestions and proposals of the ICAP members are prudent and will be considered by FBR so that the prime objective of tax base enhancement and facilitation to the taxpayer is achieved.

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