Advance tax on cos’ reserves: RRMC’s proposal dropped on corporate sector’s deep concerns

ISLAMABAD: The government has dropped a major taxation proposal of imposing an advance tax on companies’ reserves proposed by the Reform and Revenue Mobilisation Commission (RRMC) in the coming budget 2023-24.

It is reliably learnt that the proposal has been dropped by the government, keeping in view serious reservations of the corporate sector. The government has assured that no such proposal to tax reserves of companies would be incorporated in the Finance Bill 2023, sources added.

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The RRMC has proposed an advance tax on the undistributed reserves of both listed and unlisted companies.

During the meeting of the Pakistan Business Council (PBC) with Finance Minister Ishaq Dar on Saturday, the PBC also advised against tax on retained reserves due to liquidity and cost of funding working capital and of any change for the present in the Final Tax Regime (FTR) on exports due to the declining trend in much-needed exports.

The PBC assured the government support to stabilise the economy, pointed to disproportionate burden of taxes on industry, underinvestment in socioeconomic development and scope to raise Rs2 trillion additional taxes from under-taxed sectors.

Reminding the finance minister of challenges facing business, the PBC offered suggestions to broaden the tax base, stem leakages, suggested reshaping the FBR targets to focus on new taxpayers, mining data available, the CNICs, EDI on imports, and visibility on valuations prior to clearance.

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The PBC also urged long-term tax policies with no U-turns, withdrawal of multiple taxes on inter-corporate dividends and of minimum tax on listed companies and on those in tax holiday in SEZs, extension of minimum tax offset period to five years, full cross adjustment of refunds with liabilities on any other taxes.

The recommendations around taxation that the Overseas Investors Chamber of Commerce and Industry (OICCI) presented are in the interest of broadening the tax base for the benefit of the nation and building an enabling business and investment environment in the country, the OICCI stated.

The Karachi Chamber of Commerce and Industry (KCCI) requested the government to restore the past concessions, lower utility tariffs, tax relief and favourable environment earlier provided to the exporters.

Copyright Business Recorder, 2023