Businessmen demand digital payment law withdrawn

KARACHI: Country’s top trade body on Thursday demanded repealing tax law amendments binding firms to pay digitally instead of cross cheques, the prevalent mode of business transactions in the country.

The Tax Laws (Third Amendment) Ordinance, 2021 [Amendment Ordinance] was promulgated on September 15, 2021 with an aim to broaden the tax base, enforce tax compliance, and enhance documentation of economy by making it mandatory for companies to make payment through digital means only.

The Amendment Ordinance further provides certain powers to National Database and Registration Authority to support Federal Board of Revenue in achieving

these ends, though the probability of litigation of some of these powers cannot be ruled out.

Nasser Hyatt Maggo, President Federation of Pakistan Chambers of Commerce of Industry (FPCCI) in a statement said he was shocked by news reports revealing a serious ‘Conflict of Interest’ underpinning the provision of coercing companies into making payments digitally.

“It has been learnt that this proposal was initiated by a committee of the FBR; and, not by the FBR itself and that committee includes an owner of a B2B FinTech company; which provides software services for digital payments,” he said.

Maggo added it was that owner of the FinTech firm and a member of that FBR committee as well, who proposed this idea

and pushed it to be made a part of the law, according to some other committee members.

He stressed the aforementioned amendment threatens to disrupt business transactions; because almost all sales in the country were made on credit and this credit was secured through ‘post-dated’ cheques issued by buyers in favour of the sellers.

He said FPCCI had taken note of FBR’s contention: “Third party payments are highly prevalent in organised and informal sector whereby businesses do not use their

own bank accounts when making payment for supplies and tell their own customers/transaction based informal investors to make direct payments to the principal supplier”.

“It is highly prevalent in supply chains and had become an accepted norm and FPCCI considers it as a fallacious argument, as such practice cannot be employed by a company as it has to deduct withholding tax on all payments that it makes and submit returns of tax withheld to the FBR,” he added.

He said a company could only indulge in such practice if it had an ‘Undeclared Business Account’ in a bank.

“In that case, any such delinquent company can continue to make payments digitally; despite the change in the law; as the bank account used is ‘undeclared’ anyway,” Maggo said.