TAX NEWS - 2010

Pakistan Tax: Businessmen share tax issues with Finance Ministry

KARACHI: The businessmen of Karachi have shared the 2010-11 budget anomalies with the ministry of finance and said the advance tax imposed on banking transactions as per Section 231 AA should be limited to cash withdrawal and should not be applicable to NTN holders and active tax payee.

There is confusion whether the tax is imposed on all banking transactions or not, when government duties and taxes are paid. Moreover, the withholding tax imposed on imports, which was 100 percent, increased last year and further increased this year to 5 percent, this should not be more than 3 percent, they added

In view of the recent Federal budget 2010-11, KCCI President, Abdul Majid Haji Muhammad, in a press note said the reservations included the newly proposed Income Taxes, General Sales Tax, Federal Excise Duty and Custom measures.

On Advance Tax; Section 147, KCCI suggested that individual should not be put in advance tax regime and date of submission of tax return as per previous set up should remain. On the virtue of the recent budget, an individual having a turnover of Rs 50 million or above should be withdrawn.

On the Minimum Tax Payable Extended to Individual and Association of Persons (AOPs), KCCI suggested that it should be removed and minimum tax should be reduced to 0.1 percent for the distribution, and 0.2 percent for the other companies.

For withholding tax on Distributors; the word "turnover" should replace the word "imports" and the word "purchase" should be replace with the word "imports". KCCI also suggested that a separate entity status be given to distributors and reduce the withholding tax to 0.5 percent. KCCI viewed the recent imposition of rate of Tax for Individual, AOP and Distribution companies on flat 25 percent as very harsh and that it would disturb large number of SMEs. As the incidence of taxation would be very high, specially for small scale AOPs, KCCI suggested that current rate of tax should not be changed.

Advance tax imposed on import of edible oil at 3 percent, whereas on other category of import item it is 5 percent, the gap of 2 percent does not allow level playing field to all importeRs KCCI suggest removing this anomaly.

Instead of reducing load shedding & power issues, claim of arrears of power bills for the last 9 Months as per tariff rate approved by NEPRA have no justification. KCCI suggest for immediate withdrawal of this unjustified demand.

In view of Cash Expenses above Rs 50,000, which, according to recent budget, is not allowable expenditure; KCCI suggest that clarification is sought even if Cash Purchases fall outside the ambit of Section 21 and the purchases should not be treated as expenditure in term of above section. A new provision is made whereby advance tax at the rate of 5 percent shall be collected at the time of purchase on gross amount of domestic air-ticket. KCCI suggests that a person holding NTN certificate be exempted to the tax.

KCCI viewed Section 122 of Income Tax Ordinance 2001 as highly unjust. Further, the Additional Comm-issioner is empowered to amend the order as many times as he likes. The retrospective application must be withdrawn forthwith while the amendment in assessment should be on some concrete basis - not merely surmises and presumptions. KCCI suggest the time limit of retention be reduced to 04 years as now everything is automated and record may be retrieved by the relevant department through their own computer record.

In recent budget, the standard rate of sales tax has been increased from 16 percent to 17 percent with effect from 1st July 2010. Additionally, the varied rates of sales tax provided through certain SROs have also been increased. The rate of GST on various goods ranges from seven percent to 26 percent - this has badly affected the cost of businesses and geared-up inflation. KCCI suggest a single rate of 15 percent

On Section 24, KCCI suggest the time limit of retention be reduced to 04 years as now everything is automated and records may be retrieved by the relevant department through their own computer record. VAT had been suggested to be imposed from 1st October 2010, which means a Mini-Budget would follow causing flood of inflation. KCCI suggested that VAT be deferred at least for 3 years

Despite Govt assurance, regulatory duty and excise duty on imports have not been withdrawn, which is causing the loss of Rs 200bn to the exchequer under ATT. KCCI suggested to withdraw regulatory and excise duties on imports. Moreover, KCCI suggested the Government to take immediate measures on smuggling prone items and withdraw regulatory duty as well as rationalize overall duties to restrict smuggling prone items.

Customs duty on crude palm oil has been reduced from Rs 9000 per metric ton to Rs 8000 pmt to decrease cost of vegetable ghee and oil whereas the said benefit has not been extended for RBD palm olien and RBD palm oil. The benefit of the said reduction has only been passed on to 15 percent users and majority cannot enjoy the benefit of the said reduction, hence the purpose of the government to reduce ghee and cooking oil prices would not be served. KCCI suggested extending the reduction of duty of Rs 1000 per metric ton to RBD palm olien and RBD palm oil.