TAX NEWS - June 2010

Pakistan Tax: Removal of tax discriminations from budget demanded

Businessmen have called upon the government to remove all tax discriminations from budget 2010-11 before its approval from the parliament.

Speaking in a post-budget seminar at Islamabad Chamber of Commerce & Industry (ICCI), businessmen drew the attention of the government towards tax discriminations in the new budget, wherein an Association of Persons (AOPs) has been taxed to the extent of 25 percent and even has not been allowed exemption of Rs 0.3 million as has been allowed to others.

Addressing the seminar, Zahid Maqbool, President ICCI said previous income of up to Rs 0.1 million of AOPs was exempted from tax and they were subject to different slabs of tax. But now they will have to pay straight away 25 percent tax on income without exemption, which will result in massive dissolution of partnerships and disturb family businesses. He said the government plans to introduce VAT from October 1, 2010, adding that it could face problems in achieving desired results from this mode. He said VAT requires a lot of documentation work on business transactions, which will also create problems for businessmen.

He said if FBR could not handle refund cases of just 0.8 million taxpayers, how it will handle enhanced documentation work under VAT mode. Moreover, VAT will also enhance inflation from 15 to 20 percent, he added.

Shaukat Baloch, President Rawalpindi/Islamabad Tax Bar Association pointed out another ambiguity in Section 153, Subsection 9 of Income Tax Ordinance 2001 wherein currently individual taxpayers are not required to act as withholding tax agents. But the Finance Bill 2010-11 proposes to prescribe the individual whose annual turnover is Rs 50 million or above in tax year 2009 or in any subsequent tax year to act as a withholding agent for the purpose of deduction of income tax under section 153. He said this implies that the government could recover the tax of the months of year 2009 while the year 2009 has already closed on June 31, 2009. He asked the government to clarify this anomaly as it has raised a lot of concerns in taxpayers.

Zahid Maqbool appreciated the efforts of Mian Muhammad Ramzan, Chairman ICCI Sub-Committee on Taxation for giving a detailed presentation on proposed amendments in Finance Bill 2010-11 and clarifying many points of Budget 2010-11, which were creating confusion for businessmen.