Overseas investors highlight anomalies in Finance Bill 2020-21 | CustomNews.pk

Overseas investors highlight anomalies in Finance Bill 2020-21

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has highlighted several anomalies in the Finance Bill 2020-21, which are of great concern for its members, and are also contrary to the ‘ease of doing business’ policy of Federal Board of Revenue (FBR). OICCI, in separate letters to Advisor on Finance Abdul Hafeez Shaikh and FBR, requested to make appropriate changes in the Finance Bill before it is approved by the parliament. The important concern of all business entities regarding the Minimum tax regime (MTR) has not been addressed despite clear documentary evidence that the MTR is discriminatory for organizations with large turnovers but limited profit. OICCI had requested for the general MTR rate to be reduced from the existing 1.5 percent to 0.5 percent and for some specific sectors to 0.2 percent. Referring to disallowances of expenses for sales to un-registered persons, OICCI mentioned Finance Bill 2020-21 introduced a limit of sale to the unregistered buyer in excess of Rs100 million/annum and Rs10 million/month, which is harsh and unwarranted. “Barring registered suppliers to sell their goods is against the principle of equity and natural justice, especially when all the required information has been submitted by the seller to the tax authorities”. The reduction in rate of income tax to 2.0 percent on import of raw materials mentioned in Part II of the Twelfth Schedule will improve the cash flow position of companies. However, certain core raw materials used by manufacturers are still falling under the category of 5.5 percent income tax because of non-inclusion in Part II of Twelfth Schedule. “It is suggested that a general rate of 2.0 percent may be prescribed for all imports by manufacturing companies for own consumption”. The Finance Bill proposes payment of 10 percent of the tax demand created by tax officers before filing an appeal at the tribunal. Currently the provisions of the ITO 2001 allow an appeal to be filed with the Appellate Tribunal without payment of demand created by the tax officers. “The proposed amendment will create hardship and cash flow problems for the taxpayer, as in case of exorbitant tax demands 10 percent thereof could be a very significant amount and may impede the exercise of right to appeal by the taxpayer, which is a principle of natural justice and fundamental right,” OICCI noted adding it would also lead to unnecessary litigation since the appellant will approach the Courts by bypassing tribunals. The Finance Act 2018 restricted the frequency of conducting audits to once in a three-year period. The Bill now seeks to omit the condition of conducting the audit once in a three-year period. “If passed, this will unnecessarily burden taxpayers, while handing over sweeping powers to the assessing officers of Inland Revenue to conduct audits covering one or multiple tax years with no reprieve for the taxpayer available under the law, in absence of any prescribed limitation. The consequence of this change will likely erode the taxpayer’s confidence in the revenue machinery and the probable unnecessary wastage of time and effort by the revenue authorities,” OICCI observed. Bill proposes filing of withholding statements on quarterly basis, instead of six monthly. OICCI notes increasing WHT filing frequency by more than 100 percent is in conflict with the government’s policy of ‘ease of doing business’. “These filings are not only tedious and time consuming but also increase the cost of doing business. OICCI had actually recommended only one WHT filings per annum.” Finance bill 2020 proposes to exclude engineering services from the benefit of reduced rate of withholding tax of 3%, and subject such services to 8% withholding tax for companies and 10% for other than companies. OICCI believes the omission of engineering services from the reduced rate will result in very high incidence of tax especially for the corporate sector who are involved in providing engineering services to the energy, oil and gas and construction sectors. OICCI suggested exemption of 8.0 percent tax to container or chemical or oil terminal operators should also include LNG terminal operators so that they are also exempted from the applicability of minimum tax provisions like other terminal operators, and tax charged at normal rate of tax.
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