FBR agrees to tax incentive proposals of businessmen for next budget

KARACHI: The Federal Board of Revenue (FBR) agreed to a number of proposals related to tax incentives expected to be announced in the next budget, considering limitations under the IMF-backed reforms, a trade body said on Friday.

FBR Chairperson Nausheen Javaid Amjad assured the businessmen of support for resolution of outstanding issues related to taxation and anomalies.

”In the current changed economic scenario impacted by Covid-19, the taxation policies and upcoming federal budget will have to be formulated to help the trade and industry to deal with new challenges,” Amjad said, talking to office bearers of Karachi Chamber of Commerce and Industry (KCCI).

Member Inland Revenue Policy of FBR Hamid Ateeq Sarwar said the process of refund is being streamlined and cheques of duty drawbacks would be directly delivered to the exporters, and where possible refunds would also be credited directly to their accounts.

Sarwar said further tax rate of three percent on local sales to unregistered buyers would be reduced to one percent in FY2021 from three percent and would be phased out next year. ”Subject to provision of detailed data regarding paper converter industry, the FBR will consider to reduce the value addition tax from 10 percent to 5 percent of the basic sales tax.”

Member IR Policy said rules are being amended to allow the registered people to revise the sales tax return online and rectify clerical errors without the need to get prior approval from Commissioner-Inland Revenue. He asked the KCCI team to provide feedback and propose solutions to counter the harassment and misuse of powers in audits. “Reforms have been undertaken where the human interface is minimized and checks and balances are being introduced to curtail abuse,” he said.

“The FBR will hold consultations with stakeholders to prevent misuse of such powers and ensure accountability of concerned officers,” he added. “The FBR is working to create a common pool and procedures to conduct consolidated audit for sales tax, income tax and FED (federal excise duty) to eliminate multiple audits.”

On a proposal to reduce the time period for retention of records from 6 years to 3 years, Member IR Policy said in certain cases where refunds are admissible or pending it is necessary to retain records for more than 3 years. He said purchases by end-user could not be entitled to input tax against sales tax liability. “FBR is unable to accept the proposal at this time. Proposal is under consideration to shift the construction related tax policies within the purview of provinces,” he added.

Member IR said the FBR is under constraint from the International Monetary Fund (IMF) not to restore 10 percent tax credit. “In the current scenario of Covid-19, FBR will endeavor to restore the tax credit provision.”

Sarwar said withholding tax rate on local supply of goods would be rationalised in the next budget.

Member-IR policy agreed to a proposal for uniform rate of withholding tax on imports of raw materials by commercial importers and manufacturers to eliminate misuse of exemption by unscrupulous individuals. The FBR agreed to allow adjustability of additional 1.7 percent paid by the importers with tax returns.

KCCI proposed withdrawal of exemption in withholding tax to large import houses in the budget 2020/21, which was agreed by the FBR. He said sales tax 17 percent on import of industrial machinery would be revised to 10, 5 and 1 percent according to various categories.

The FBR official said simplified forms for tax returns filing would be issued for different categories of taxpayers. On certain proposals, the FBR officials assured the businessmen of taking up them with higher authorities to reach amicable solutions.

Businessmen Group Chairman Siraj Kassam Teli said the government has to take extraordinary measures to support trade and industry to ensure their survival in these difficult times. ”The impact of this crisis is severe for economies like Pakistan which are already burdened with debt,” Teli said. Trade and industry is unable to cope with the financial impact of lockdowns and many businesses are facing bankruptcies.”