The corporate sector is least bothered about tax reforms, to be introduced by the government, and manages tax avoidance with the help of experienced teams of Chartered Accountants and tax practitioners, said sources. Official sources from the regional office of the Federal Board of Revenue (FBR) said the reform process would only help small taxpayers, facing problems in dealing with tax issues.
So far as the corporate sector is concerned, it is equipped with all the techniques to deal with all kinds of reforms in a befitting manner, especially in a situation when the FBR begs deposits from these big corporate firms to meet revenue shortfall every year. They said the corporate sector can easily manage all types of reforms. One leading auto manufacturer, for example, is showing financial loss in his tax returns over the last 10 years.
They said auto company has shown income only for once in these years while rest of the decade was full of losses. In 2010, they said, "this auto manufacturer had shown a sale of Rs13 billion which has reached Rs112 billion today but still it is filing tax return with a loss while claiming that it is unable to meet expenses and the department should not reattribute their income and pushes it to a vicious circle."
They said a number of Chinese and Turkish companies, operating in Pakistan, were involved in such practices. Similar is the case of the Independent Power Producers (IPPs) who claim royalty under their guaranteed rights and show losses in their financial statements to avoid tax. They claim royalty as their expense and reduce their income.
According to sources, a leading international retail chain in the city is involved in procuring worn cloths (Landa) from the open market and displays it for consumers on exorbitant profit. Also, they said, retail chain is procuring substandard toys from a business concern 'Dream Toys' in Shah Alam Market and selling it to consumers on high profit. This retail chain is also involved in tax avoidance, they added.
They said all the foreign companies operating in Pakistan have hired experienced Chartered Accountants to ensure technical entries to the financial statement to show losses. They have minute details of past disputes with FBR and suggest their bosses as how to deal with tax issues who prefer to file a writ petition and keep pending the issue for a long period.
The department, on the other hand, lacks sufficient workforce as well as capacity to deal with the experienced teams of chartered accountants of big corporate firms.