LAHORE: Chairman Federal Board of Revenue (FBR) Dr Muhammad Ashfaq has said that at present, tax-to-GDP ratio is around 12 per cent while the expenditure is around 20 of the GDP. The difference of 8 per cent has to be managed through loans which have to be owed by our generations. “Nation has to pay taxes to bridge the gap of 8 per cent”.
Speaking at the Lahore Chamber of Commerce & Industry here on Sunday, he said that people have to take the responsibility of cost of managing the country so that next generations don’t have to suffer.
Dr. Muhammad Ashfaq said that those taxpayers would not face any problem, who have made their system flawless. He said that duties have been imposed on the import of plants and machinery as being done throughout the world and the sales tax rate would be rationalized in due course.
The Chairman said that FBR refund system is one of the best in the world and ST refunds are being cleared in 72 hours. He said that the requirement of CNIC of purchaser is a must as the transactions of billions were being made under fake CNICs. To a question regarding bank accounts attachment, the Chairman said that it is a civilized way for recovery instead sealing properties or business premises.
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While agreeing with the LCCI President Mian Nauman Kabir, the Chairman FBR said that there should be no misuse of tax exemptions in FATA and PATA. He said that to rectify the things, a system is well on the way. He said that in the upcoming budget, withholding tax would be rationalized. He said that Rs. 100 billions are being collected through minimum tax but it would be abolished within next 3 to 4 years.
LCCI President Mian Nauman Kabir highlighted the issues of taxation measures in supplementary finance bill, bank accounts attachment, withholding tax, harassment by the tax officials and duties and taxes on the essential raw materials, etc.
Kabir said that various taxation measures taken in the Finance Supplementary Act 2022 will have an adverse impact on the growth of our economy & industry. He said that the Sales Tax exemptions on imported plant and machinery have been withdrawn and the same are subjected to 17% Sales Tax. This would make it difficult for our industrial sector, particularly SMEs to undertake technological up-gradation and hence the export competitiveness of our Industrial sector would be adversely affected. This measure can start a new wave of De-industrialization in the country.
He said that the cost of doing businesses in the recent times has increased tremendously. To bring the cost of doing business down, we need to diversify our energy mix to cut the cost of electricity production by increasing the share of renewable energy, particularly solar. The measure of abolishing Sales Tax exemption on import of solar panels and renewable energy equipment can prove to be a big obstacle in achieving the objective of making our energy mix more cost effective.
He said that the sale tax exemptions on seeds for sowing which includes pest-resistant and high yielding hybrid seeds have been withdrawn. This will adversely affect our crop output. Similarly the sales tax exemptions on agriculture equipment e.g. drip irrigation and sprinkler systems have been withdrawn.
The LCCI President said that the Sales Tax exemptions on different feeds have been withdrawn which will adversely affect the poultry, livestock and fisheries sectors. He said that agriculture Income is exempt from income tax under Section 41 of Income Tax Ordinance 2001. It is proposed to include raw hides and skins in agricultural Income.
Mian Nauman Kabir said that Sales Tax Exemptions on the import of raw materials for industries operating in Export Processing Zones have been withdrawn. Since the exports are zero rated, the government should clarify the mechanism of Refunds. This measure will adversely affect the foreign investment in Export Processing Zones.
He said that the legal cover provided to seller from application of sales tax liability and penalty, in case if the CNIC of the purchaser is found to be incorrect has been withdrawn. This change is against the spirit of ease of doing business and would adversely affect day-to-day business operations. The LCCI President added that the FBR has allowed its officers to forcefully recover taxes from the bank accounts of taxpayers without seeking approval of Chairman FBR and intimation to the CEO/ owner of the company. We are of the view that actions like bank attachment would prove to be a big hindrance in the creation of business-friendly atmosphere in the country. We recommend such discretionary powers should be withdrawn, he said.
LCCI Senior Vice President Mian Rehman Aziz Chan said that the long-standing issue of misuse of tax exemptions by the industries based in erstwhile FATA/ PATA is hampering the competitiveness of industries especially based in Punjab. The FBR granted Sales Tax and Income Tax exemption to industries based in erstwhile FATA/ PATA in 2018 on imports of certain raw materials for their consumption under SROs 889(I)/2018, 890(I)/2018 and 1213(I)/2018.
Mian Nauman Kabir said that in a recent development, the exemption of FED has also been granted to the industries based in erstwhile FATA/ PATA w.e.f 1st July 2021. These raw materials are imported and sold in Punjab which results in heavy tax evasion. This misuse is seriously hurting the regular industries based outside FATA/PATA especially the Foam Industry and Steel Melters, etc. We request you to resolve this issue on urgent basis, he said.
He said that to reduce the cost of doing business, the government should reduce the rate of withholding tax. Since most of the businesses operate on very low profit margins, the rate of withholding tax which goes up to 4.5% should be brought down between 0% and 1% to make sure that businesses do not face liquidity problems.
Copyright Business Recorder, 2022
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