Sarhad Chamber of Commerce and Industry (SCCI) has called for extending the period of tax exemption under Clause 126L of Part-1 of 2nd Schedule to the Income Tax Ordinance 2001 for another five years term to conclude on June 30,2023. The demand was made in its proposals submitted for the federal budget for 2019-20.
According to the recommendations, the Clause 126L of the Part-1 of 2nd Schedule to the Income Tax Ordinance 2001 states that the profits and gains derived by a taxpayer from industrial undertaking set-up in the provinces of the KP and the Balochistan between Ist day of July 2015 and 30th day of June 2018 for a period of five years beginning with the month in which the industrial undertaking is set up or commercial production is commenced, whichever is later will enjoy tax exemption.
It said that the chamber has noticed that the political conditions of the province, mainly due to war and terror in the first four years of the previous government had witnessed no significant investment. Moreover, the industrial estates established by the Khyber Pakhtunkhwa Economic Zones Development and Management Company (KP-EZDMC) and Sarhad Development Authority (SDA) could not establish the industrial estates as planned during the years from July, 2015-June 2018.
The chamber has also strongly recommended the participation of the chamber's representatives in formulation of policies and procedures for imposing of taxes on services in the province for which FBR should provide an opportunity in collaboration with government of the Khyber Pakhtunkhwa and Khyber Pakhtunkhwa Revenue Authority (KPRA) authorities and prevail upon the later to reduce tax on services extended by chartered accountants and consultants at the rate not exceeding 5 percent in line with similar levy charged in Sindh and Punjab.
The SCCI has also recommended for appropriate measures including the selection of cases for audit should not be repeated which could be restricted once in three years at least and it should be through random balloting by FBR in first instance, and if it selected under the random balloting the same principal should apply as described that no audit should be kept continued if the commissioner is provided with adequate explanation upon intimation for audit cases routed through I&I should have no influence over the concerned commissioner of RTO in cases justifying initiating audit Under Section 177.
The chamber has suggested appropriate amendment in Section 177 of the ordinance ibid. The chamber further recommends that the FBR should outline audit policy on its website as there is no such policy after TY 2016, which should also contain privilege of providing right of complaint to the taxpayer in case they feel aggrieved with authority concerned or on matters of alike nature.
The SCCI has also pointed out another hardship frequently noticed that most of the field officers are initiating audit/monitoring of withholding taxes in compliance to the provisions of Section 165, which once initiated carries impact more than the audit proceedings under Section 177.
It said that the business community represented by the chamber is quite vigilant about its responsibility as a withholding agent and so does the requirements of Section 165 are recommended to be restricted to the cases selected for audit or alternatively, cases selected once for probe under Section 165 should not be repeated every year.
The hardships reported at the chamber's desk include cases falling under FTR (final tax regime) are probed extensively under Section 165 in addition to penalizing for non-filing of statements with proved NIL liability at the filer's end. It adds that power extended to the commissioner/sub-ordinate officers are therefore, reportedly misused for least benefit of the FBR.
The chamber has also called for the strengthening of the appellate forums available under the law. The office of the Commissioner Inland Revenue (Appeals), being the first appellate stage for the taxpayers, needs lot of improvements like, the commissioner posted must not be revenue oriented, independent in disposing appeals judiciously for which he should be working under the administrative control of the Ministry of Law having powers to remand back the cases where he is convinced that injustices have been made with the taxpayers and that the matter could be remanded back for a probe afresh, currently he cannot do this, plus an officer appointed as Commissioner (Appeals) should not be subsequntely assigned any functions of an office or authority of sub-ordinate to FBR like RTO posting etc.
It said that Appellate Tribunal in Khyber Pakhtunkhwa is like non-existing and despite having a chairman representation from KP province twice during last two years, currently during last five years, there is no independent bench (double bench) in the province.
The cases pertaining to KP are being routed through Appellate Tribunals Special Benches of Islamabad, which virtually creates great hardships both for the taxpayers and ARs representing taxpayers. Moreover, the members posted in such benches are again revenue oriented and doesn't appears to be inclined to provide relief to the taxpayers.
It added that tt is worth mentioning that a number of cases lying in appeals are generally build-up due to erroneous demand of taxes raised incompetently and thus, creates hardships.
The chamber has strongly recommended that the Appellate Tribunal should be working under the administrative control of the high court of the respective territory, since these steps will create and again confidence of the taxpayers, besides considering independence of the first appellate forum, i.e. Commissioner Inland Revenue (Appeals) across the country.
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