ISLAMABAD: Overseas Investors Chambers of Commerce & Industries (OICCI) has asked the government to bring all sectors of the economy, including agriculture, real estate, and wholesale/ retail trade, into the tax net in accordance with their contribution to Gross Domestic Product (GDP).
The OICCI, which is comprised of over 200 multinational companies operating in Pakistan, recommends the government to bring a constitutional amendment and slap Agriculture Income Tax under the domain of the federal government.It also asks the government to abolish Super Tax and jacking up taxable ceiling of salaried class from Rs0.6 million to Rs1.2 million per annum as well as rationalising tax rates on upper slabs.
The forum asks for the usage of technology, and data analytics including Artificial Intelligence tools and make better/ effective utilisation of Nadra and FBR Malomooat Portal database and other documented sources to ensure that all income earners should pay due taxes.
The various data/ transactions reported through withholding statements, data submitted by banks and utility companies, property registrar, excise, sales tax returns etc should be used by the Federal Board of Revenue (FBR) to broaden the tax base without burdening the existing compliant taxpayers.Based on the information exchanged through OECD Global Forum on Transparency and Exchange of Information, an appropriate action should be taken to bring undisclosed income/ assets in the tax net and eliminate culture of amnesty schemes as it discourages the honest taxpayers, it says.
It recommends reintroduction of Computerised National Identity Cards (CNIC) requirement on all cash transactions above 50,000, to bring trade section under tax net. A point of sale (POS) system to be made mandatory for sales tax and integrate it with their traders’ income tax returns. A POS type integration to be made mandatory for all property transactions. Furthermore, NTN to be made mandatory for property sale or purchase.
It says the government should take stern action against illicit cigarettes share of over Rs80 billion and made no upward adjustment in the rate of Federal Excise Duty (FED) in the coming budget.
While considering current economic turmoil and inflationary pressure on prices and cost, the OICCI recommends that the minimum tax should be abolished, at least for listed companies. ii. General rate of Minimum Tax u/s 113 of ITO 2001 should be reduced from 1.25 percent to 0.25 percent and adjustment/ carry forward of minimum tax credit shall be allowed for at least five years as was the case prior to amendment made vide Finance Act 2022.To simplify the withholding tax regime, the tax rate applicable on services should be made uniform at the rate of 3 percent as already provided to 29 service sectors. As the tax for service providers is a minimum tax, the high rate of eight percent further increases the cost of doing business.
The categorisation for withholding tax rate should be for active and non-active taxpayers only. This will reduce the number of existing withholding rates by half. There are 200 different tax rates for 24 WHT sections, and the FBR should simplify the overall structure of withholding taxes by harmonising tax rates and there should be single rate under each section, where possible. For example, single rates should be imposed for section 156 (prizes and winnings) at the rate of 15 percent and section 233 (Brokerage and Commission) at the rate of eight percent etc.
Tax on capital gain on disposal of securities should be according to the holding period. Section 37A allows gradual decrease in applicable tax rates from 15 percent to 0 percent on securities acquired after July 1, 2022, with the holding period ranging from one year to six years. It is recommended that all securities should be taxed as per their holding period regardless of the date of acquisition, with a reduction in rates, where holding period is longer. Therefore, clause (i) and (ii) of the First Proviso of Table to Division VII of Part I of First Schedule to be deleted.
The data of import should be a public property (restrictively) to ensure transparency, which will also help in taking over of goods under Section 25A of the Custom Act 1969, introduce stringent controls for illicit trade, introduce tighter penalties (e.g. criminal liability) for illicit trade across the whole value chain – retailers, distributors, and manufacturers, control the Afghan Transit Trade, the OICCI says.