Pakistan Business Council says FBR data holds key to broader tax base

KARACHI: The Pakistan Business Council (PBC), the business advocacy platform, has called on the government to utilise data available to the Federal Board of Revenue (FBR) to expand the tax base, proposing measures to simplify taxes and support business growth.

The PBC, in its proposals for the upcoming budget for FY24-25, said the country's taxation regime needs fundamental reforms to lead to sustainable growth of both the country and tax revenues, and taxes should be simple, predictable and supportive of business growth.

“The FBR has access to financial data in various forms including the monthly statements submitted by withholding tax/collecting agents as per various sections. Information as per Statement under sections 165A, 165B, 175A and NADRA, FIA, Bureau of Immigration and Overseas Employment records are also available. This can be a start to bringing new taxpayers in the net. In addition, the FBR has also collected data about tax paid by non-filers on vehicles, immovable property & on gains made in the stock market,” PBC said.

The PBC said Advance Tax for filers needs to be reduced and significantly increased for non-filers to reduce burden on tax complaint taxpayers and proposed to impose section-wise increases in withholding rates for non-filers.

The PBC said the misuse of POS by importers, who use fake registration profile of retailer should be checked.“To prevent this unscrupulous practice, the following should be made mandatory for entities whose imports are over 70% of their output and who have a POS facility: a) Should declare the number of their retail shops; b) Provide the square ft. retail space, detailed address, and Google pin location for all the retail stores c) Report per shop per month sales volume and invoices along with the monthly sales tax return.”

Moreover, in order to discourage issuance of flying invoices and to encourage proper reporting of sales, rate of further tax should be reduced to 1 percent or to a maximum of 1.5 percent.PBC called for the omission of Serial # 151 of Table 1 of Sixth Schedule of Sales Tax Act 1990, which allows sales tax exemption on import of industrial input in tribal areas.

The council expressed that massive under-invoicing especially by commercial importers is destroying domestic industry.The PBC proposed that the values at which import shipments are cleared through PRAL (Pakistan Revenue Automation (Pvt.) Limited) or CARE need to be publicly available.

“The Government of Pakistan must insist on Electronic Data Interchange (EDI), for both FTA (Free Trade Agreement) and non-FTA imports from China and other major trading partners

“In future the requirement of EDI should be made compulsory for imports from

FTA / PTA and major trading partner countries. S. 25(A) and 25(D) of the Custom Act 1969 (“Act”) to be amended to allow local manufacturers to participate in fixing the ITP.” The council said that a mere representation from commercial importers as is the case currently, poses risk of biased decisions, which will hurt overall tax / duties collection as well as the local manufacturing industry.

“The proposed amendment will allow for greater input from the local manufacturers Further, valuation ruling should be issued in consultation with brand owners, i.e., those who have valid registration of the brands under relevant intellectual property laws.”

On the imposition of Super Tax, which was imposed on the documented sector retrospectively through the Finance Act, 2022, the council said that the government should specify timelines for the applicability of super tax.

“Mere levy of super tax without any specific timeline is simply an increase in the corporate tax rates from the current 29 percent.” It said super tax should be applied on progressive tax basis instead of application of a certain percentage on the entire income.“Moreover, in order to encourage reinvestment or profits of super tax should be eliminated for all industries or at least for industries engaged in: a) exports; and b) import substitution.”