Corporate tax rate in Pakistan is highest in region: President FPCCI

FPCCI holds Pre-Budget consultative meeting with FBR The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) held a video-link Conference with the Federal Board of Revenue (FBR) to discuss the FPCCI proposals for the ensuing Federal Budget 2020-21 at FPCCI Head Office Karachi, Capital Office Islamabad and Regional Offices Lahore & Peshawar. The FPCCI team was led by Mian Anjum Nisar, President, FPCCI whereas the FBR team consisting of Javed Ghani, Member Customs and Dr. Hamid Ateeq Sarwar, Member IR was headed by Nausheen Javaid Amjad, Chairperson, FBR.

Initiating the conference, the FPCCI Chief Mian Anjum Nisar said that the severe and adverse impact of the outbreak of COVID-19 pandemic on various aspects of Pakistan’s economy is quite discern which may lead to negative growth rate, deterioration in current and fiscal balance, disruption in supply chain, increased employment rate etc. “This underscores the need to take extraordinary steps to support trade and industry to ensure their survival on sound footings such as reduction in utility tariffs; taxation rates (Income Tax / WHT , Sales Tax , FED etc.) at least for six months and thereafter may be reviewed keeping in view of the economic scenario” , he proposed.

The FPCCI President Mian Anjum Nisar disclosed that the corporate tax rate at 29% in Pakistan is highest in the region which due to multiplicity of taxes (2% WWF + 5% WPF) goes upto 36% and as such provides incentive for its evasion and encourage corruption.

Zakaria Usman, Convener of the FPCCI Budget Advisory Council (BAC) urged the FBR that the apex trade body of stakeholders, FPCCI should always be consulted in preparation of policies related to trade and industry so that the FPCCI should also extend its cooperation in their implementation and enforcement. He proposed to waive the demur-rage and detention charges, keeping in view of the lockdown situation due to COVID-19. He further said that the customs tariff be levied on the basis of cascading to curb post-budget anomalies. The Convener of the BAC proposed to encourage import substitution industries and export of non-traditional items.

Abdul Qadir Memon, Member, BAC in his presentation of Direct Taxes proposed that wherever the income is generated be taxed without discrimination; Corporate Tax rate be reduced gradually at 1% annually as high tax rate discourages investors; WHT regime be revamped by abolishing those WHT which generate insignificant revenue for ease of doing business and reducing cost of doing business, uniform rate of WHT be levied and WHT Agents be incentivized; a uniform tax rate may be levied on AOP, individuals and small companies ; turnover tax on distributors be reduced and make it at par with dealers; the income from property be taxed at a uniform rate of 15% of the gross rent as full and final discharge of tax liability; Tax credit @3% available to a manufacturer on 90% of his sale to registered person upto June 2017 may be restored ; the tax credit for investment under Section 65B may be restored , Section 65E may be extended to factory building and manufacturing related infrastructure also and be extended to 30th June 2025 ; Minimum tax rate should be reduced from 1.5% to 1.0% ; Alternative Corporate Tax (ACT) may be deleted to provide correct taxation of companies ; The power to select the return for Audit / amendment of Assessment of income may rest only with the FBR under Section 214C of the Ordinance ; Alternative Dispute Resolution be reactivated.

Ashfaq Tola proposed that tax credit , like companies should also be allowed to AOP and individuals as they also make investment.
Zeeshan Merchan`t, Member, BAC said that number of WHT be reduced by exempting low yielding avenues like telephone bill, school fee etc.

Zakaria Usman proposed that the rental income from property, AOP or individual and company be taxed at a uniform rate of 15% of the Gross Rent as full and final discharge of tax liability, as it has also increased the rent of warehouses etc., and as such has escalated cost of doing business.

The Chairperson of FBR replied that tax on distributors would be uniformed ; tax rates including minimum tax rates would be reviewed for reduction ; WHT paid would be appeared on IRIS w.e.f June, 2020 ; Exemption Certificate Law would be amended and rationalized ; option would be given to remain in PTR or opt for normal tax regime ; greenfield industry issue would be resolved in consultation with Engineering Development Board (EDB).

Regarding CNIC condition the Chairperson, FBR said that agreement has been made with the traders and cannot be reversed. She added, “Refunds are fully automated under FASTER ; amendment in Annexures-F&H should be identified by the exporters for FBR consideration; tax on machinery would be abolished ; reduction in sales tax rate would not be reduced to a single digit as it would bankrupt the economy of the country and further tax rate would be reduced.

In response to the customs issues raised by the FPCCI, she replied RD on tyre would be considered to abolish in the next budget. She proposed to hold second round of the meeting to discuss the FPCCI Proposals in detail for consideration and incorporation in the forthcoming Federal Budget 2020-21.