KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed a presumptive high income tax reduction for Tier 1 integrated retailers and their goods suppliers in line with the withholding rate. source applied to the FMCG sector.
“A lower turnover tax rate of 0.25% will be prescribed for each integrated retailer to facilitate voluntary compliance by non-integrated retailers,” the FPCCI said in its proposals for the 2022-23 budget.
“Blanket immunity shall be granted to all retailers from sales tax and income tax assessment and audit procedures of prior tax periods/years who register and integrate with FBR within a given time frame, unless specific information is available to FBR from third party sources regarding tax evasion.”
The FPCCI stated that with the exception of computer voting for the selection of audits and withholding control procedures, there should be blanket immunity for integrated retailers against modification of the on-site verification of evaluation procedures.
“Integrated retailers face technical complications related to FBR POS software limitations, including lack of technical expertise/resources, connectivity and system maintenance, while various other technical issues also add to compliance risk. “
He urged the government to establish city-specific, centralized and dedicated areas within tax offices for integrated retailers. “Therefore, all issues of integrated retailers can be resolved through a one-stop shop for technical and operational issues and an audit-free environment can be ensured.”
The apex trade body also suggested the authorities introduce special reduced income tax rates to encourage fully integrated retailers who displayed transparent turnover and resulting profits, compared to non-integrated companies. who filed their declarations without being integrated or exhaustively checked.
“This reduction could be introduced by a tax credit of 20 to 50% for 3 to 5 years. This will build confidence and sustainability for onboarded and compliant taxpayers until the entire industry is onboarded. »
Regarding the withholding tax regime, the apex trade body has proposed that varying withholding tax rates are the biggest challenge for filing tax returns.
“Currently, there are different withholding taxes on imports of different goods. Such as raw materials face WHT at 2%, plant and machinery (1%) and supplies (4.5%). Due to multiple rates, companies are also reluctant to register on the list of active taxpayers. It is recommended that withholding tax rates be within the range of 0-1% and in no case exceed 1%,” the FPCCI said in its budget proposals.
He proposed that the withholding tax on imports under Part I, Part II and Part III of the Twelfth Schedule under Section 148 be revised to 0%, 0.5% and 1% respectively.
The number of withholding taxes is also to be reduced by 25 and currently due to the multiplicity of taxes for the business sector it is reduced to 36% (29% normal tax + 2% workers provident fund + 5% worker participation fund), the trade body said.
He said the higher tax rate was effectively a deterrent for multinational groups to set up their businesses in Pakistan.
The FPCCI proposed that the previous policy of reducing corporate tax rates be reinstated and that the corporate tax rate be gradually reduced to 25%.
The employer should have the right to spend the worker welfare fund on their employees, being an eligible expense, he suggested to the government and added that the advance ruling facility should also be made available. of the resident taxpayer.
“Locals cannot be discriminated against with respect to goods or investments of foreign origin in terms of policy facilitation, which is also expressed within the framework of WTO TRIMs. It should also be clarified that the advance ruling will be valid even if the non-resident taxpayer, after obtaining the ruling, becomes a resident. He recommended that the minimum turnover tax be reduced.
The current 1.25% minimum turnover tax rate is high and unjustified because the minimum tax must be paid regardless of the entity’s profitability, the trade association said.
The FPCCI also recommended that the government restore the situation before the 2016 finance law with regard to the exemption of intercompany dividends in articles 59AA and 59B as it was before the 2016 finance law.
The Finance Act 2016 excludes entities entitled to group relief under Article 59B entirely from the exemption.
Alternative Dispute Resolution Committee (Section 134A) Subsection (4) of Section 134A provides that the committee appointed under subsection (2) shall decide a dispute by consensus.
Generally, in any dispute resolution by arbitrators, the majority decision is an acceptable standard. It was also proposed to replace the words “by consensus” with the words “by majority”.
FPCCI suggested that claims regarding FBR’s ADRC application could be transferred to FTO, which could resolve these issues under Section 33 of the FTO Order.
“Under the provisions of Section 33, FTO may make arrangements to resolve complaint issues at the local office level and by forming honorary advisory committees to resolve issues. In addition, FBR will always have the opportunity to make a representation against FTO’s decision before the President of Pakistan,” FPCCI said.
Over the six-year audit period (section 174), the trade association was of the view that this section allows the commissioner to require the financial records for audit purposes, therefore companies are required to keep records for a period of six years. “Such a long audit period only adds unnecessary cost and burden to businesses and gives discretionary powers to the assessment officer and recommends reducing the audit period from the existing six years to three years. “
Regarding the power of the commissioner to vary the assessment order (section 122 5A), he stated that under section 122 5A the commissioner has the right to vary the assessment order as he just think. “This causes serious difficulties for taxpayers because now, due to this explanation, the tax authorities are using the explanation as a means of tax collection instead of a deterrent.” The FPCCI also recommended the removal of Section 122 5A to increase the ease of doing business.