Govt proposes huge tax cut for Pakistan Cricket Board

FBR may also waive Rs800 million of past tax liabilities

ISLAMABAD: In what appears to be a dubious move, the government has proposed a huge reduction in income tax rates for the Pakistan Cricket Board (PCB) in addition to waiving millions of rupees in past liabilities amid questions over making amendments to the law with retrospective effect.

Through the Finance Bill 2016, the Federal Board of Revenue (FBR) has proposed that in the future PCB income should be taxed at a final rate of 4% instead of the standard income tax rate, lowering its liabilities potentially manifold. Not only that, it has also proposed that the PCB can settle its past liabilities for the period 2010-2015 by paying tax at 4% of gross revenues.



The offer is tantamount to giving an amnesty to the PCB, as the tax authorities had demanded Rs800 million from the PCB for the last four years. The proposals are part of the Money Bill that the government has tabled in the National Assembly for approval.

Suspicious activity

Sources said a blue-eyed chartered accountant was behind the move, who, allegedly in connivance with other members of the FBR, managed to get the proposals added to the Money Bill. The same person had also been accused of manipulating the income tax regime for service providers in the last budget.



The FBR spokesperson twice changed his position over giving tax relief to the PCB. While speaking at a press conference on Monday, Dr Mohammad Iqbal claimed that no tax relief had been given to the PCB, as the FBR had proposed to charge the PCB income at 4% tax rate instead of 1% being charged from service providers.

However, the spokesperson’s view was contrary to what the Income Tax Ordinance says. The law treats the PCB as a sports body, which is being taxed at the normal rate. When Iqbal was contacted again, he confirmed that the FBR had proposed to charge 4% final tax from the PCB against the standard rate. The PCB and the FBR have been engaged in a tax dispute for the last many years. The FBR has demanded Rs800 million in taxes with respect to PCB income in the past few years.



Now, the FBR has given an option to the PCB that the board can pay taxes at 4% of gross receipts with respect to tax years 2010 and onwards, subject to the condition that the PCB will withdraw pending appeals and pay the outstanding taxes at 4% of gross receipts by the end of June. Iqbal confirmed that the FBR was receiving normal income tax rates from the PCB before proposing the new amendment and Rs800 million had been demanded at the normal tax rates. He, however, maintained that the decision would not significantly lower the past tax liabilities of the PCB, as the 4% tax would be calculated on gross revenues of the board.

PCB’s defence

There was striking similarity between the points of view of the FBR spokesperson and the PCB. The PCB was of the view that it provided cricketing services and earned income from home series in the UAE.

It further said the income from export of goods and services was taxed at the rate of 1%, therefore, its income should also be taxed at this rate.



However, independent legal and tax experts have questioned the FBR’s proposal of changing the tax rates with effect from 2010. They said legal amendments, if passed by parliament, should take effect from July 1, 2016. Finance Minister Ishaq Dar has recently stated that the government was preparing a new tax regime for addressing loopholes, which were eventually exploited by those who opened offshore companies. However, Dar said these legal changes could not take effect retrospectively.

But when it comes to the PCB matters, the government is ready to give effect to the proposed changes from the past. 

Published in The Express Tribune, June 7^th, 2016.

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