Profit on debt scheme: non-resident firms' exemption may be withdrawn

The Central Board of Revenue (CBR) may withdraw exemption to non-resident companies on income from "profit on debt" under the Ten-year taxation plan, "Vision-2017" approved by the President.
Sources said on Friday that the "Vision-2017" envisages total revenue collection of Rs 4.3 trillion and tax-GDP ratio (14.5-15 percent) by 2016-2017. Some of the proposals of "Vision-2017" would be implemented in the upcoming budget, while other would be gradually made part of the national tax policy. According to the plan, the CBR is likely to extend the scope of incentives provided to the "Small Company" in budget 2007-2008. Board would change the definition of "Small Company" to enhance the investment limit of such companies.
Similarly, "new tax definition" for SME will be incorporated in the budget to make the SME sector more vibrant for the benefit of lower strata of the economy. The board may also announce measures for the facilitation of the 'group companies' through amendment in the Income Tax Ordinance 2001 from next fiscal. Some relief to the non-listed companies is likely to be announced in the coming budget.
The plan has also underlined revision in exemption threshold to self employed and salaried taxpayers in view of the prevailing per capita income. The CBR will also issue instructions to the Regional Tax Offices (RTOs) to submit monthly statement of refund along with the monthly Progress Report (MPR) to the board.
Sources said that the legal changes would be made in the income tax law keeping in view the interpretations made by the Supreme Court of Pakistan and Federal Tax Ombudsman (FTO) to minimise litigation.
Sources disclosed that the "Vision-2017" also contain long term taxation measures on the sale tax side to broaden the tax base. The ten-year taxation plan has also elaborated measures to ensure taxation of the non-profit organisation (NPOs) and regulatory authorities.
Following issues are also part of the "Vision-2017" plan, which are under consideration of the tax authorities: Withholding tax on "profit on debt" with reference to exemptions available to Pensioners Benefit Accounts; Bahbood Saving Certificates and cases where investment in National Saving Scheme is less then Rs 150,000.
The CBR is also examining the justification of Inter Corporate Dividend Tax in view of international best practices. The impact of WWF and WPPF on corporate sector and industrialisation. Its utilisation by Ministry of Labour and Ministry of Finance for the welfare of workers would also be analysed. Other issues included 100 percent depreciation allowance on capital goods in the first year-incentive for capital investment on the analogy of oil exploration sector.