Replaces members with conflict of interest; will listen to service providers. CREATIVE COMMONS
The government has reconstituted the committee it formed to resolve the dispute over the 8% minimum tax imposed on services sector, after partiality issues were raised on two of its members.
Asim Zulfiqar, a chartered accountant at AF Ferguson and Co, has been dropped from the list and has been replaced by a former member of the Federal Board of Revenue (FBR) Habib Fakhruddin. Naveed Andrabi has also been replaced by Abid Shahban.
Finance Minister Ishaq Dar had constituted the five-member committee to consider grievances of service providers in relation to the minimum tax imposed on the corporate sector through Finance Act, 2015. The members had been suggested by the FBR that failed to do its homework before recommending names to the finance minister.
Transparency International Pakistan (TIP) had claimed that the committee members had a conflict of interest. It said Naveed Andrabi had filed a petition in the Lahore High Court (LHC) on behalf of his client who is/are service providers, against the 8% minimum tax, while Asim Zulfiqar belonged to the AF Ferguson and Co - the auditiors of many cellular companies.
Meanwhile, a FBR official said the decision to reconstitute the committee was not taken after TIP’s claims. “Although the TIP raised objections, the government did not take the decision to reconstitute the committee under its pressure,” said the FBR official.
“The TIP does not enjoy a good reputation in Pakistan, even the Germany-based Transparency International has distanced itself from the TIP,” he added.
Meeting of the reconstituted committee
The reconstituted committee commenced its business on Wednesday under the chairmanship of Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan. It decided to invite the service providers through their respective trade bodies, who filed representations before the federal minister and the FBR.
They have been asked to make a presentation and justify the reduction in the rate of minimum tax.
The Committee would give its recommendations after reviewing the presentations made by various trade bodies and associations, according to the official handout.
“The 8% minimum tax may not be withdrawn in totality,” said the FBR official. “Instead, the FBR may recommend the government to lower the tax for those sectors that have lower profit margins.”
“For seeking any relaxation, the specific sector will have to establish its case by providing the audited financial accounts of the last two years,” he added.
Through the Finance Act 2015, the government had imposed an 8% minimum tax on service providers’ revenue, irrespective of their profit. Service providers termed the levy a “draconian law”. The committee would suggest amendments in the Income Tax Ordinance’s section 153 that deals with minimum tax on all the service providers.
The government would either introduce a Bill in the Parliament to give effect to the recommendations or promulgate an Ordinance, as the FBR does not enjoy powers to issue Statutory Regulatory Orders in general cases.
However, it still has the powers to issue SROs to increase or decrease tax rates in cases where the government has made commitments with the international financial institutions.
Published in The Express Tribune, September 10th, 2015.
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