WT be made final discharge of commission agents' liability, KCCI proposes changes in taxation law

Siraj Kassim Teli, President, Karachi Chamber of Commerce and Industry (KCCI), has suggested that withholding tax be made full and final discharge of indenting commission agent's tax liability in federal budget for 2004-05.
He noted that withholding tax on indenting commission has been reduced from 10 percent to 5 percent.
The Chamber is in the process of preparing its pre-budget proposals, and asked its members to send their suggestions as soon as possible to be incorporated in the budget proposals.
Meanwhile, he has pointed out some important issues which include:
I. INCOME TAX
1. U/S 175(2) Power to Enter and Search Premises: Under this provision of income tax ordinance, 2001 the Commissioner may authorise any 'valuer' or expert to enter any premises and perform any task assigned to him by the Commissioner. The Chamber considers it most unfriendly, unfair and against the 'Tax payers Friendly' concept and therefore the provision be deleted from the statute.
2. Burden of Proof: As per the provisions of the Income Tax Ordinance, burden of proof has been shifted to taxpayer, whereas the onus must be on the person who imposes taxes and makes a claim of any kind of default or discrepancy. This is against all the norms of justice, equity and fair play. There are many cases in which it is held by superior courts that the burden of proof is with assessing authorities instead of tax payers.
3. Mandatory Payment for Filing of Appeal U/S 127: Condition for mandatory payment of 15 percent of the disputed tax amount prior to filing of appeal is against the very right of seeking justice. The requirement for payment of 15 percent of disputed tax demand for filing of first appeal be removed.
4. Reduction in Tax Rates: The modern fiscal policy pursued by the most progressive countries is to make revenues grow, not by increasing income-tax rates but by enlarging the tax base. Therefore the present corporate tax rates of 43 percent, 35 percent and 47 percent for unlisted companies, listed companies and banking sector, respectively, are too high and be suitably reduced.
5. Notice to obtain information or Evidence U/S 176: By virtue of this section the Commissioner can call for any information from any person, impound any accounts or documents and if a hard copy or computer disk of information stored in a computer is not made available to the Commissioner has the power to impound and retain the computer for as long as is necessary to copy the information required. Such harsh provision needs to be reviewed.
6. Federal Tax Ombudsman: The office of Federal Tax Ombudsman, which has been providing relief to the tax payers against the misuse of discretionary powers of the tax collecting officials, needs to be strengthened. There are decisions of the FTO not implemented by CBR.
II. SALES TAX
7. Multiplicity of Audit: Notices are served to the tax payers for auditing of the same records which had already been audited and completed. This is against the provision of Section 25(2) of Sales Tax Act 1990 which stipulates audit once in a year. The frequent visits and audits including duplication of an audit between DRRA and Sales Tax Collectorate must be done away with.
8. Blacklisting and Suspension of Registered Units: The Sales Tax Collerctorate has issued a list of about 518 suspected units and blacklisted them unilaterally, without assigning any reason, seeking explanation, or providing any concrete evidence to support the allegation of issuing fake and flying invoices against them. The Collectorate is blacklisting them on very lame excuses like non-delivery of mail, non-availability of registered person, closure of shop at the time of visit of tax officials etc. Moreover, the procedure of blacklisting a unit as laid down in Sales Tax General Order No.6/2003 dated 20-12-2003 was issued after blacklisting these 518 units. The practice of blacklisting traders and industrialists be immediately stopped, as it creates harassment and promote corruption.
9. Application of Provisions of Section 73 of the Sales Tax Act 1990: Application of new provision of Section 73 of Sales Tax Act introduced vide Finance Act 2003 could not be implemented as it was not made keeping in view the ground realities and therefore it was suspended again and again and then ultimately up to 30th June, 2004 with a view to making it simple and business friendly by removing its harsh provisions in consultation with trade and industry. Subsequently, the KCCI, keeping in view the best interests of both stakeholders and government exchequer and in consultation with the CBR had finalised a draft on provisions of Sections 73 and 7 of the Sales Tax Act 1990 and already submitted to the CBR vide its letter dated 16th October, 2003. The proposal be incorporated in the Sales Tax Act 1990.
10. Non-Adjustment of Further Tax U/S 7(1): As per Finance Act 2003, adjustment/deduction of Further Tax from input tax has been disallowed and for this purpose amendment has been made vide SRO 1090(I)/2003 in the 'Filing of Monthly Return Rules 1996'. The adjustment of Further Tax must be allowed as it is unjustified, as it is for un-registered sector and cannot be claimed and is just another way to accumulate funds, lying pending with the Collectorate for adjustment/refund to registered persons particularly exporters.
11. Search without Warrant U/S 40-A of Sales Tax Act, 1990: By virtue of Section 40-A, the Assistant Collector has been authorised to search any premises without warrant, and the power is being misused to raid offices and factories. The judiciary should not, in any case, be by-passed by the tax authorities, as the issuance of warrant is the domain of judiciary which on the application of the executive, either grants or refuses search after due consideration on its merit. Therefore, the Section 40A of the Sales Tax Act be removed.
12. Further Tax U/S 3(1A) & Multiple Sales Tax Rates: The 3 percent rate of 'further tax' in case of supplies made to non-registered person is too high and is promoting smuggling regime. Moreover, multiple sales tax rates (15 percent, 18 percent and 23 percent) besides being discriminatory are creating confusion and hardship in filing monthly sales tax return. Further tax is a main source of issuance of fake/flying invoices. Therefore, a uniform and integrated rate of sales tax be levied and the further tax which runs counter to the very principle of Sales Tax be abolished.
13. Delay in Sales Tax Refund Claim: Our members frequently complain about the problems faced by them due to inordinate delay in payment of their Sales Tax Refund claims, even after the completion of audit and other formalities. This causes financial problems, rendering execution of export orders difficult. Some effective and pragmatic mechanism has to be evolved to ensure the refund within the prescribed time limit. Although the CBR and its collectorates have switched over to automation, but we have never been provided month-wise stuck up amount with details of reasons, although we have repeatedly asked for it in writing.
14. Double Taxation: The central excise duty is now being levied only on five to six industries, which is a double taxation, as they are already being subjected to sales tax. The central excise duty may, therefore, be abolished altogether in deference to the commitment of the government.
III. CUSTOMS
15.GATT Code of Valuation: Although the government has adopted GATT Code of Valuation since long, in conformity with the provision of WTO, but it is not being implemented in its true spirit and in most of the cases transactional value is not considered and assessement is made on high value without evidence. Now the ITP data-base valuation is being inducted. It is not clear as to what is the compatibility between ITP data-base valuation and GATT Code of Valuation. Most of the importers have reservation of virtually switching over to the old ITP system. We are of the opinion that if the retention of ITP data-base valuation is considered inevitable, then this mechanism be vetted by World Custom Organisation (WCO) and WTO to lend credibility to the system.
16(a) Detention of consignment on a single baseless complaint. Sometimes the imported consignment is detained by the Customs on a single complaint by any trader or industrialist without any basis, thus inflicting heavy losses to the genuine importers. In order to avoid this situation, we propose to form a committee, comprising the Collector of Customs (Appraisement), Controller of Customs (Valuation) and representatives from the Chamber to check and verify the bona fides of the complaint and to dispose of the same immediately.
17.Smuggling: The gravity of the menace of smuggling, which continues to eat into the vitals of our economy, both through Afghanistan Transit Trade Agreement as well as Iran routes, has now been further accentuated through other routes as well. The Karachi markets are flooded with Chinese goods, including different qualities of fabrics, apparel and garments, footwear, engineering and electronic goods etc. This alarming situation calls for more deterrent physical and fiscal measures. The rate of duty on smuggling-prone items be drastically reduced and the import of machinery and parts be made zero-rated.
18. Duty and Tax Remission Rules: The Duty and Tax Remission Rules for exports (DTRE) under SRO-450(I)/2001, indeed provide an opportunity to the exporters to opt out from the hassle of seeking refunds and duty draw-back claims. However, they need to be more streamlined and further simplified. For example, under section 297(1) of DTRE, information of each export order is required from the exporters, which is not always easy to provide.