LAHORE:Federal Board of Revenue (FBR) Chairman Dr Muhammad Ashfaq said on Sunday that the sales tax (ST) rate would be rationalised in due course of time.
He was talking to business community here at the Lahore Chamber of Commerce and Industry (LCCI), where LCCI President Mian Nauman Kabir, Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq also spoke.
The FBR chairman said, “We all have to take the responsibility of cost of managing the country so that the next generations don’t have to suffer. At present, tax-to-GDP ratio is around 12 per cent, while the expenditures are around 20pc of the GDP. We have to pay taxes to bridge the gap of 8 per cent.”
Dr. Ashfaq said that those taxpayers would not face any problem who have made their system flawless. He said that duties have been imposed on the import of plants and machinery, as being done throughout the world.
The chairman said that the FBR’s refund system was one of the best in the world and the ST refunds were being cleared in 72 hours. He said that the requirement of CNIC of purchaser was a must as the transactions of billions were being made on fake CNICs. About bank accounts attachment, the chairman said that it was a civilised way for recovery instead of sealing properties or business premises.
The FBR chairman agreed that there should be no misuse of tax exemptions in Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal areas (PATA). He said that to rectify the things, a system was well on the way. He said that in the upcoming budget, withholding tax would be rationalised. Dr Muhammad Ashfaq said that Rs. 100 billion were being collected through minimum tax, but it would be abolished within next three to four years. He said that more tax exemptions would be withdrawn in the next budget.
In his welcome address, LCCI President Mian Nauman Kabir said that various taxation measures taken in the Finance Supplementary Act 2022 would have a negative impact on the growth of economy and industry. He said that the ST exemptions on imported plant and machinery had been withdrawn, thus making technological up-gradation difficult for industrial sector, particularly the SMEs. It would also affect country’s export competitiveness.
“In order to lower the cost of doing business, we need to diversify our energy mix by increasing the share of renewable energy, besides reviving ST exemption on import of solar panels and other renewable energy equipment,” he suggested.
He also called for restoring sale tax exemptions on seeds for sowing which includes pest-resistant and high yielding hybrid seeds, agriculture equipment e.g. drip irrigation and sprinkler system, feeds of poultry, livestock and fisheries, import of raw materials for industries operating in Export Processing Zones (EPZs).
He said that agriculture income is exempted from income tax under Section 41 of Income Tax Ordinance 2001. It is proposed to include raw hides and skins in agricultural Income.
The government has reduced import duties on many raw materials lines in the last few years and also in the previous budget, he mentioned and hoped that this process would continue in the Federal Budget 2022-23 and all the remaining raw materials which are not manufactured locally would be declared zero rated through the elimination of Regulatory and Customs Duties.
LCCI Senior Vice President Mian Rehman Aziz Chan said that the long-standing issue of misuse of tax exemptions by the industries based in erstwhile FATA/PATA is hampering the competitiveness of industries especially based in Punjab. The FBR granted Sales Tax and Income Tax exemption to industries based in erstwhile FATA/PATA in 2018 on imports of certain raw materials for their consumption under SROs 889(I)/2018, 890(I)/2018 and 1213(I)/2018.
He added that in a recent development, the exemption of FED (Federal Excise Duty) has also been granted to the industries based in erstwhile FATA/PATA w.e.f 1st July 2021. These raw materials are imported and sold in Punjab which results in heavy Tax Evasion. This misuse is seriously hurting the regular industries based outside FATA/PATA, and this issue should be resolved on urgent basis. Withholding Tax rate of 4.5 percent should be reduced to zero or one percent as most of the businesses operate on very low profit margins, he added.
LCCI Vice President Haris Ateeq said that a proposed that a clear policy be devised for Tier-1 retailers’ POS (Point of Sale) integration and for the purpose, the condition of area specification may be removed, declare the one shop retailers exempted from the POS integration and the consumption of electricity units may be used as a parameter instead of cost of electricity. For retailers operating in air conditioned mall, plaza or shopping center, the area of 500 square feet or more may be specified.
Mian Nauman Kabir said that Small & Medium Enterprises play a vital role in accelerating economic growth and poverty alleviation by employment generation. There are up to 5.2 million SMEs in Pakistan with 30 percent contribution in GDP. SMEs are the largest contributor to employment generation in the country i.e., 78 percent of non-agriculture sector employment, and having 25 percent of the share in exports of the country.
LCCI former presidets Bashir A. Baksh, Sohail Lashari, Tahir Javed Malik, Zafar Iqbal Chaudhry, former vice presidents Shafqat Saeed Piracha, Kashif Anwar, Tahir Manzoor Chaudhry and Executive Committee Members were also present.