Turnover tax may be reduced to 0.1 per cent

KARACHI: The National Assembly Standing Committee on Finance and Revenue has verbally committed a reduction in turnover tax to 0.1 per cent from the current one per cent, said the Vice Chairman of BusinessMen Group, Tahir Khaliq.

A delegation of the Karachi Chamber of Commerce and Industry (KCCI) and the Association of Distributors, led by Tahir Khaliq, met with members of the standing committee on Wednesday in Islamabad.

Fauzia Wahab chaired the meeting while representatives of the Federal Board of Revenue were also present. They discussed the turnover tax of one per cent imposed on the distributors in the Budget 2010-11.

The turnover tax was 0.5 per cent earlier. The distributors had asked for the tax to be done away with as it has been imposed on total turnover rather than income, but the government increased this in the recently announced budget.

Speaking to The Express Tribune on Thursday, Khaliq said that the government did not want to exempt this sector from the tax net regardless of whether the distributors were making a profit or not.

He explained that the government’s perspective was that as long as there is some turnover, it is alright to tax the distributors, terming the levy a minimum tax.

He said that a distributor’s business is one which is 100 per cent recorded, as not doing so would lead to his trade getting out of control.

“We deal mostly with multinationals and foreign companies and also wholesalers, retailers and consumers, therefore our business is easy to keep a tab on,” he said.

Khaliq said that the distributors were not happy with the hike mainly because, unlike other businesses, they could not decide their own profits and the concerned manufacturer set it for them in the agreement the two parties signed when a deal was made.

“Due to this we are sometimes not even left with a 0.5 per cent profit and if we have to pay one per cent turnover tax, we will run into a loss,” he added.

However, now after this meeting, the distributors are very hopeful that a positive decision would be implemented soon, he said. “We are grateful to the committee for hearing us out and asking for our opinion in the matter,” he added.

Khaliq said that the delegation explained to the committee the issues that they were facing and in turn, the committee asked them for a solution.

“We ourselves agreed to be taxed at the rate of 0.1 per cent and the committee appeared to be satisfied with our suggestion,” he concluded.

Published in the Express Tribune, June 18^th, 2010.