Special Assistant to Prime Minister on Revenue Haroon Akhtar has assured the investors and multinational companies that the issue of disallowing input tax adjustment against provincial services would be resolved by the end of current month. Sources told Business Recorder here on Monday that Haroon Akhtar has convened separate meetings with Chairman Sindh Revenue Board (SRB), Overseas Investors Chamber of Commerce and Industry (OICCI) and Pakistan Business Council (PBC) at Karachi.
Special Assistant to Prime Minister on Revenue went to the office of SRB and met its Chairman and advisor to discuss key issues including reconciliation of input tax adjustments data, disallowance of input tax adjustment against provincial services and other related issues. In separate meetings with the OICCI and PBC, Haroon Akhtar conveyed to the top investors and representatives of multinational companies that the issue would be duly resolved by the end of current month. Other key issues raised by the members of the OICCI would also be given due consideration by the FBR.
On the issue of Super Tax, Special Assistant to Prime Minister on Revenue explained the OICCI/PBC about the rationale behind extension of one year in payment of Super Tax by the corporate/banking sector.
Haroon Akhtar has reportedly informed that the FBR is actively interacting with the provinces on the issue of disallowing input tax adjustment against provincial services. During the meeting with OICCI, the representatives of the OICCI appreciated the recently notified values of immovable properties by the FBR for accurate assessment of taxes. They also appreciated the pro-investment measures of the FBR taken in the budget (2016-17). The measures for the promotion of industry and trade relating to the increased tax credits were also appreciated.
Through Finance Act 2016, federal excise duty was abolished on services subjected to provincial sales tax. This particular measure was highly appreciated by the representatives of foreign investors etc during these meetings. ICCI members raised main issues including omission of provincial sales tax levied on services from the definition of input tax. This fundamental change in the sales tax regime, if not revoked, will substantially increase the cost of doing business for all business sectors.
Second issue is related to the continuation of Super Tax for another year. This levy is discriminatory as only efficiently governed tax compliant organisations are impacted. Moreover, this is in violation of GoP promise last year that it would be levied only for one year (last fiscal year).
Thirdly, change of regime from zero rating to tax exempt and levy of Regulatory Duty on dairy products. It is detrimental for documented sector and favours the undocumented sector. The fourth issue is related to the Group Taxation. The proposal for abolishment of exemption for inter-corporate dividends and restriction of the right to surrender losses should be deleted and current position maintained, otherwise it will be counterproductive for promoting large investment in the country.
The fifth issue is related to the minimum tax on turnover. The application of minimum tax on entities making gross loss is an extremely harsh measure for companies making major new investments in plant and machinery. Sixthly, the proposed increase of one percent Customs duty will impact consumer price index and adversely affect ST exemption of pharma sector imports unless corresponding correction made in sales tax laws. Seventh, the federal laws need to be updated to account for provincial enactments and deduction of expenses paid to provinces allowed for tax calculations pertaining to the workers welfare/profit participation funds.