Corporate tax, Sust income sharing: FBR to help Gilgit-Baltistan BoR draft new bill

The Federal Board of Revenue will assist the Gilgit-Baltistan Council Board of Revenue in drafting of the new bill for imposition of income tax on certain categories of persons including corporate sector of Gilgit-Baltistan (GB), 35 percent corporate tax on GB-based companies and sharing of customs duty between the FBR and the GB on the clearance of Chinese goods from the Sust Dry Port.
Sources told Business Recorder here on Friday that the decision has been taken in the last meeting of the Technical Group of the FBR and the Gilgit-Baltistan Council Board of Revenue to examine the draft Bill on the imposition of the income tax in Gilgit-Baltistan.
It has been decided that 100 percent imposition of income tax law of Pakistan in the Gilgit-Baltistan would be considered by re-drafting a Bill for the tax authorities of the Gilgit-Baltistan Council Board of Revenue. Another major decision is that the FBR and the authorities of Gilgit-Baltistan have agreed to share duties and taxes particularly customs duty on the imported goods cleared through the Sust Dry Port.
In this regard, the portion of the duty collected would be determined for allocation to the tax authorities of the Gilgit-Baltistan Council Board of Revenue. Top tax managers would assist the said Council in drafting the new Bill including proposed amendments in the Income Tax Ordinance 2001 for bringing corporate sector and business suppliers within the documented regime.
According to sources following points have been discussed in the recent meeting of the Technical Group at the FBR Headquarters: Firstly, in case of uniformity of the adapted law with Income Tax Law in Pakistan, there would be no issue of tax evasion by the companies, creation of tax haven and credits/adjustments.
Secondly, the FBR only collects customs duty and other taxes from Sust Dry Port. The sharing of these taxes would be decided by Ministry of Finance, after determining imports for Gilgit-Baltistan and down-country. However, in principle FBR would have no objection to sharing of the revenue with Gilgit-Baltistan Council.
Thirdly, since Gilgit-Baltistan has been given political empowerment after 62 years, tax responsibility should be compatible with political rights. In case Gilgit-Baltistan has political rights as in Pakistan and constitutional status, 100% imposition of Income Tax Law of Pakistan would be appropriate. Fourthly, if tax is collected only from salaried class & contractors and businessmen are exempted, there would be no Income Tax collection even at Sust Dry Port and companies would dissolve themselves.
After detailed deliberations, the following decisions were taken at the level of the Technical Group of the FBR and the Gilgit-Baltistan Council Board of Revenue: One, Ministry of Finance may be approached for an agreement on sharing of Custom Duty with Gilgit-Baltistan Council.
Two, all conceivable loopholes are required to be plugged in the proposed Bill for legislation. Three, instead of introduction of amendments in the First Schedule of Income Tax Ordinance, 2001, an appropriate provision of exemption may be inserted in the adapted Second Schedule of the Income Tax Ordinance 2011.
Four, the Business Class of the Gilgit-Baltistan may be brought in tax net to avoid legal complications and disputes among different categories of taxpayers. Five, a proper definition of individual and contractors may be added by inserting a Clause "domiciled in Gilgit-Baltistan and deriving income from Gilgit-Baltistan".
Sixth, it has also been decided that the tax on companies would be at uniformed rate of 35 percent. Seven, an appropriate provision may be added to empower Gilgit-Baltistan Council Board of Revenue to suspend any facility and issue statutory regulatory order (SRO) for clarification/ facilitation of the Law.
Eight, a team of senior tax officials of the FBR would assist Gilgit-Baltistan Council Secretariat in redrafting the Bill including proposed amendments in the Income Tax Ordinance 2001. Some of persons who actively participated in the whole process of ensuing tax compliance in Gilgit-Baltistan included Tariq Tarar, MNA, Ghulam Hussain Saleem, Advisor GB Council and senior FBR officials. The parliamentarians including Tarar also co-ordinated with the tax authorities of the FBR for proposed legislation in the tax laws for collection of taxes in Gilgit-Baltistan.