LAHORE: Federal Board of Revenue (FBR) Chairman Shabbar Zaidi termed smuggling, under-invoicing and Afghan Transit Trade the biggest threats to domestic industries.
“The FBR has observed that domestic industries are under severe pressure due to smuggling, under-invoicing and the Afghan Transit Trade,” Zaidi said while talking to members of the Lahore Chamber of Commerce and Industry (LCCI) on Saturday.
He said measures were being taken to stop these kinds of trade misconduct and until these ills came to an end, there would be no use of conducting raids on shops selling smuggled goods or merchandise with unpaid duty.
The FBR chairman also ruled out the continuation of SRO 1125, which was related to the zero-rated sales tax facility, for five major export-oriented sectors but assured exporters of prompt tax refunds.
“The decision to withdraw the zero-rating facility was taken after careful deliberations,” he remarked, adding that tax refunds to exporters would be made immediately without delay.
He added that the government would release the outstanding payments without requiring state funds.
Regarding past tax refunds, the FBR chief said they had accumulated before he took charge of the FBR but from now on, there would be no delay. He assured businessmen of considering some other alternative if refunds were delayed.
Zaidi remained firm on the tax measures introduced by the government and emphasised that if any flaws were found in the budgetary measures, they would be rectified.
“The new budget was prepared with a view to promoting the domestic industry and employment,” he noted.
Regarding the computerised national identity card (CNIC) condition for sale to unregistered buyers, Zaidi pointed out that the rule would come into effect from August 1, adding that the reason for reluctance to buy from producers was not CNIC, but something else.
Lamenting the tax evading culture in Pakistan, he pointed out that dealers did not want to enter the tax net, which was an unfair practice.
“Out of 341,000 industrial connections, only 43,000 users are paying income tax and less than 19,000 are registered for sales tax,” he revealed, adding that governments could not run smoothly if taxable persons did not pay taxes.
He highlighted that an overwhelming majority of 3.1 million commercial power consumers did not pay any tax at all.
Zaidi pointed out that turnover tax on cement and sugar dealers had been reduced from 1.5% to 0.25%. “Dealers of all suppliers should pay income tax according to their income in line with other taxpayers,” he added.
Talking about traders, he pointed out that shops with an area of 240 square feet had been kept in the fixed tax regime and majority of the traders fell within that bracket.
Tax on shops or trading premises in the range of 241-1,000 square feet would be charged on the basis of their electricity bills, he said. Traders possessing shops of more than 1,000 square feet would have to register under the normal tax regime, he added.
He said a study of the profits declared by many large industrial units revealed that the tax was around 1.5% while dealers of those companies were living a luxurious life.
On real estate, the FBR chairman said the government aimed to promote construction activities and not plot buying-selling culture. “Measures taken in the budget will facilitate builders and it will now be difficult to park illegal wealth in real estate,” he highlighted.
On the occasion, the business community requested the FBR chief not to implement tax reforms in one go as that practice had sparked panic among middle and low-tier traders.
They said many traders did not want to be taxed so they would take some time to make up their mind. They also asked Zaidi to stop referring to them as thieves.
Those businessmen who were conducting business in a corporate style and filed tax returns said if the practice continued, they would not support the government in implementing its tax agenda.
Published in The Express Tribune, July 7th, 2019.
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