PCDMA urges FBR to ease tax compliance

KARACHI: The Pakistan Chemicals and Dyes Merchants Association (PCDMA) has submitted a set of budget proposals to the Federal Board of Revenue (FBR), aimed at providing relief to taxpayers and fostering greater trust between the business community and tax authorities.

In its recommendations, PCDMA Chairperson Salim Valimuhammad highlighted the growing burden of compliance on taxpayers, noting that excessive documentation requirements and frequent audits are discouraging participation in the formal economy. The budget proposals were compiled by a committee led by Umair Tariq.

Valimuhammad emphasised that while many taxpayers are willing to comply, they often struggle due to limited technical knowledge and the uncooperative attitude of tax officials. The association called for a more supportive and educational approach from the FBR to encourage voluntary compliance.

He also raised concerns over audits conducted under Section 165, which pertains to withholding tax returns. As withholding agents are already responsible for tax collection, the added pressure of audits creates unnecessary stress. The association proposed discontinuing these audits to ease the burden on businesses.

A key issue highlighted in the proposals was the difficulty faced by families in continuing business operations following the death of a sole proprietor. Under current regulations, legal heirs must reinitiate the registration process. The PCDMA recommended allowing a family member to be added as a representative in the deceased’s Iris profile to ensure business continuity. Valimuhammad also called for the revival of the final tax regime (FTR) for commercial importers. He noted that although these importers continue to pay the additional sales tax (value addition tax), the audit exemption that was previously granted in return has been withdrawn without explanation. The association demanded either the reinstatement of audit immunity or the removal of the additional tax.

The PCDMA also urged the government to provide relief under Section 8B by restoring the earlier facility for commercial importers. If immediate restoration is not feasible, the association suggested allowing at least 95 per cent of output tax to be adjusted, with only 5.0 per cent payable, to help address liquidity challenges. To combat the issue of fake invoices, the association proposed reducing the rate of Further Tax from 4.0 per cent to 1.0 per cent, making compliance easier for legitimate businesses. It also recommended a phased reduction in the general sales tax (GST) rate, starting with a cut to 16 per cent, with the long-term goal of reaching a single-digit rate. Regarding local supplies, the association suggested lowering the withholding tax rate on raw materials to 2.0 per cent for companies and 2.5 per cent for individuals.