KARACHI: Whilst appreciating all the positive measures to revive industry and put the country on a sustainable and inclusive growth trajectory, Pakistan Business Council (PBC) has made some recommendations to the Finance Minister to reflect in the Finance Act.

Restore the Protection against Double Taxation of Intercorporate Dividends: Clause 103C of Part 1 of the Second Schedule was removed just prior to the budget proposal, subjecting intercorporate dividends to double taxation, thus discouraging investment which the country is in dire need of.

Recommendation: The very rational protection against double taxation of intercorporate dividends, which is provided in many developing and developed countries and was available in Pakistan for nine out of the last twelve years, needs to be restored. This will encourage further group formation, which in turn will result in scale, wider shareholding and diversification of investment as well as the creation of jobs.

Further, an amendment be made in Part IV of the Second Schedule exempting intercorporate dividends from withholding tax.

Power to Arrest & Prosecute – Section 203A: The Finance Bill proposes to insert a new section to arrest and prosecute a person involved in concealment of income or any offense warranting prosecution under the Ordinance. It is proposed to delegate the power of arrest to the level of an Assistant Commissioner of Inland Revenue or other officer of equal rank, authorized by the Board in this behalf.

However, the PBC recommends that this Section be deleted as it runs a high risk of being misused to harass taxpayers, contrary to the stated intent of the government. Instead, the existing provisions in the tax law be strengthened and exercised only upon determination, independent of the FBR, of concealment of income.

Enhancing the Scope of the Term “Smuggle” by Including Retailing Section 2(s): The Finance Bill proposes to further enhance the scope of the term “smuggle” by including “retailing” of such goods in the scope of smuggle – the PBC welcomes this addition.

Recommendation: In addition to smuggled goods, it is proposed that the Section 2(s) be expanded to apply to “counterfeit” and “illicitly produced” goods to help safeguard both the FBR’s revenue and health of the general public. Amendment Introduced Vide Clause 96 (XXIX) to tax medical benefits provided to salaried employees: Through this amendment the exemption available under clause 139 of Part 1 of 2nd Schedule to the Income Tax Ordinance, 2001 has been deleted. The said exemption was dealing with the medical reimbursement and/or allowance including hospitalization provided by an employer. The withdrawal of said clause will have a direct impact on the well-being of employees since the existing medical facility provide by the state is not sufficient in any manner and there is a heavy reliance on private medical facilities. Moreover, a serious medical emergency will sharply and unpredictably increase the tax burden of the salaried class with very limited means of meeting such liability.

Recommendation: Amendment introduced vide Clause 96(XXIX) be withdrawn.

Copyright Business Recorder, 2021