FPCCI proposes to assign third-party tax audit task to FTO

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Wednesday recommended that the Federal Tax Ombudsman (FTO) office should be assigned the task of conducting the third-party tax audit.
In a post-budget seminar, the FPCCI said the tax audit by the third-party should be included in the main tax laws with pre-determined audit parameters and mechanism to ensure transparency and exclusive to the market and the Federal Board of Revenue (FBR) interest.

FPCCI President Mian Nasser Hyatt Maggo proposed that the FTO office may be considered to be assigned the third-party tax audit – as it is exclusive to any market interest because of its constitutional presence – on one-time basis, assuring the transparency in conducting the tax matters of taxpayers aggrieved at the hands of the tax officials.

“Our proposed tax model sent to the prime minister, finance minister and the FBR was based on simple, fair and predictable tax system: 10 per cent income tax on individuals and association of persons (AoPs); 20 per cent income tax on companies; single-stage 5 per cent sales tax (for exporters zero per cent tax); low rate Customs duty (one chapter, one rate 5 per cent) on all items (with 15per cent to 20 per cent tariff protection for local industry) and FED
only on luxury and hazardous products.

The prime minister had issued directives to the revenue board to examine the FPCCI proposals in terms of agreed, non-agreed and partially-agreed proposals; but to no avail. The follow-up two meetings were held with the finance minister and FBR in which it was assured that the budgetary suggestions along with the tax model presented by the FPCCI would merit the consideration. However, the FPCCI suggestions have not been incorporated in the budget, while certain measures announced in the budget are partly reflective of the FPCCI’s proposals.

He highlighted the gravity of the issues arising out of the introduction of Section 203A and, that too, in the presence of the already available provisions being overlooked, in this regard, by the means of Section 192A and other appropriate associated sections with regard to the inevitable need to arrest the taxpayer on account of civil liability.
Maggo asked for deletion of this provision on an immediate basis to calm the agitating businessmen. On the issue of inclusion of retailers in the definition of smuggling, the FPCCI president said better and effective enforcement to disable the supply of smuggled goods to retailers is required; instead of leaving the retailers at the mercy of the inspection agencies/FBR.

Maggo also demanded withdrawal of the proposed Section 127 of the Income Tax Ordinance 2001; which has made filing of appeal contingent upon depositing 100 per cent disputed tax amount, which is against the right to fair trial in terms of Section 10A of the Constitution of Pakistan that guarantees a person to be entitled to fair trial and due process.

He also proposed to omit Section 140 in the field of income ordinance by which the FBR will be entitled to withdraw the initial stage disputed amount from the taxpayer’s bank accounts; which does not provide the determined civil rights and obligations for a fair trial and due process.

Maggo said that the introduction of new penalties and confiscation of goods due to not accompanying invoice list in the container does not match with the ongoing claims of excluding human interaction in clearance of goods and payment of taxes.

The present trade includes different destinations of negotiations and transshipments and origins of goods; in which the process and procedure of exporting destination may not accommodate such provision of putting invoice in the containers; hence, this proposal in the budget should be withdrawn, he added.

FPCCI Vice President Nasir Khan demanded that Schedule 6th and 8th should be reviewed for restoring the exemptions on food items; which is also the objective of the present government to reduce the food inflation by fiscal measures.

The distortions in the sales tax treatment in respect of plant and machinery for different industrial sectors should be done away with and all the plant and machinery for production should be exempted from the sales tax, he added.
Discussing exemptions provided to the Federally-administered Tribal Areas (FATA) and the Provincially-administered Tribal Areas (PATA) exemptions, Khan said that the mechanism of exemptions should be structured in such a way that the exempted goods may not become another source of smuggling to the tariff area.

He also discussed Section 8B of STA and said that the adjustment of 100 per cent should be allowed in an indiscriminate manner; as presently, it is proposed to be allowed specific to listed and non-listed companies; while earlier it was allowed for a few companies and specific sectors.

This is not fair and infringes on facilitating at parity treatment to trade across-the-board. He also suggested adopting automated issuance of exemption in the WeBOC (Web based One Customs) and the National Single Window to facilitate exports as given in the case of the issuance of exemption certificates automatically.

Discussing the CNIC, Zakaria Usman, former president of the FPCCI and convener of the FPCCI Budget Committee, said that the wrong decision of imposition of CNIC conditions on the sale has been counterproductive, resulting in the misuse of CNIC and development of fake and flying invoices culture.

Moreover, FBR Member Operation said that due to this condition there has been a shortfall in the sales tax collection. This is not the way of broadening the tax base and; hence, should be withdrawn to increase unconcealed business activities.

The FPCCI reiterates abolishment of withholding taxes and remains proponent of the income tax on the income, as presently major taxes are collected by withholding taxes instead of using efforts of big work force of the revenue authority.

The FPCCI demanded the FBR to share draft list of the proposed additional Customs duty, regulatory duty and other “ifs and buts” proposed in the draft SROs so that before their issuance anomalies can be arrested.

Maggo said that the present tax system negates the constitutional requirements; whereby, tax judicial function has to be independent and separate from the tax collecting machinery so that the constitutional obligation is complied with.
The FPCCI has written to Chief Justice of Pakistan to take cognizance of the ongoing violation of the Constitution in taxation affairs conducted by the FBR, he said, adding that the stock of anomalies from last year remained to be resolved due to non-inclusion of the raw materials used in manufacturing in part II of 12th Schedule of Section 48 of ITO 2001; which should be ensured for inclusion in the Federal Budget 2021/22.

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