Govt's failure to address tax issue irks investors
Claim minimum tax regime is discriminatory for organisations with large turnover but limited profit
Representational image. PHOTO: REUTERS
KARACHI:
Foreign investors have voiced regret over the issue of minimum tax regime (MTR) not being addressed in budget 2020-21 despite clear evidence that it is discriminatory for organisations with large turnover but limited profit.
In a letter written to Adviser to PM on Finance Abdul Hafeez Shaikh, the Overseas Investors Chamber of Commerce and Industry (OICCI) proposed MTR rate to be reduced from the existing 1.5% to at least 0.5% for industry while for some specific sectors, it proposed 0.2% rate.
The current credit incentive, granted for new investments, is expiring in a year hence the chamber requested the government to extend the scheme for two more years to encourage fresh investment.
The Finance Bill 2020-21 proposes introduction of a new clause according to which, proportionate input tax cannot claimed. The clause stated that even an industrial undertaking would not be entitled to claim deduction for any expenditure attributable to sales made to unregistered persons. For unregistered buyers, the bill also introduced a limit on sale in excess of Rs100 million per annum and Rs10 million per month, which the OICCI considered harsh and unwarranted.
"Barring registered suppliers to sell goods is against the principle of equity and natural justice especially when all the required information has been submitted by the seller to the tax authorities," the letter added.
The chamber also requested exemption from withholding tax on import of raw material and demanded a fixed rate of 2% because some of the raw material did not fall in any of the three described categories and hence 5.5% tax was levied on it. The new finance bill also proposed elimination of the condition to conduct tax audit once every three years.
The chamber highlighted that such a law would give sweeping powers to the assessing officers of Inland Revenue department to conduct audits of one or multiple tax years with no respite for the taxpayer available under the law. It also proposed filing of withholding statements on quarterly basis instead of half yearly filing which would double the burden on companies, the chamber stressed.
Talking about MTR, a source in the industry, on the condition of anonymity, said there were companies which ended up paying 60% of their profit in tax due to this regime.
He underlined that some enterprises were forced to pay the tax even when they reported losses. Regarding unregistered buyers, he was of the view that it was the government's responsibility to penalise them rather than imposing curbs on those who sold them merchandise.
Published in The Express Tribune, June 20th, 2020.
Foreign investors have voiced regret over the issue of minimum tax regime (MTR) not being addressed in budget 2020-21 despite clear evidence that it is discriminatory for organisations with large turnover but limited profit.
In a letter written to Adviser to PM on Finance Abdul Hafeez Shaikh, the Overseas Investors Chamber of Commerce and Industry (OICCI) proposed MTR rate to be reduced from the existing 1.5% to at least 0.5% for industry while for some specific sectors, it proposed 0.2% rate.
The current credit incentive, granted for new investments, is expiring in a year hence the chamber requested the government to extend the scheme for two more years to encourage fresh investment.
The Finance Bill 2020-21 proposes introduction of a new clause according to which, proportionate input tax cannot claimed. The clause stated that even an industrial undertaking would not be entitled to claim deduction for any expenditure attributable to sales made to unregistered persons. For unregistered buyers, the bill also introduced a limit on sale in excess of Rs100 million per annum and Rs10 million per month, which the OICCI considered harsh and unwarranted.
"Barring registered suppliers to sell goods is against the principle of equity and natural justice especially when all the required information has been submitted by the seller to the tax authorities," the letter added.
The chamber also requested exemption from withholding tax on import of raw material and demanded a fixed rate of 2% because some of the raw material did not fall in any of the three described categories and hence 5.5% tax was levied on it. The new finance bill also proposed elimination of the condition to conduct tax audit once every three years.
The chamber highlighted that such a law would give sweeping powers to the assessing officers of Inland Revenue department to conduct audits of one or multiple tax years with no respite for the taxpayer available under the law. It also proposed filing of withholding statements on quarterly basis instead of half yearly filing which would double the burden on companies, the chamber stressed.
Talking about MTR, a source in the industry, on the condition of anonymity, said there were companies which ended up paying 60% of their profit in tax due to this regime.
He underlined that some enterprises were forced to pay the tax even when they reported losses. Regarding unregistered buyers, he was of the view that it was the government's responsibility to penalise them rather than imposing curbs on those who sold them merchandise.
Published in The Express Tribune, June 20th, 2020.