Industrialists have urged the government to revisit SRO 889, saying unchecked discretionary powers for monitoring production with digital equipment may spark de-industrialisation in the country.
The SRO allows the Federal Board of Revenue (FBR) to install digital equipment such as a camera on plants and factories to monitor production in order to prevent tax evasion.
However, according to businessmen, it gives arbitrary powers to government officials.
Karachi Chamber of Commerce and Industry (KCCI) President M Shariq Vohra said the SRO 889(I)/2020, dated September 21 and issued by the FBR, whereby amendments were made to the Sales Tax Rules 2006, was the proverbial last straw on camel’s back.
New Chapter XIV-BA has been added, which seeks to install digital monitoring equipment and video cameras with sensors in many industries to monitor their production. The KCCI president said such measures would only lead to de-industrialisation because the industrialists were already fed up with many issues and problems hurting the industries.
Industries were already overburdened with a high cost of electricity, load-shedding of gas and electricity, crumbling infrastructure, lack of water supply, high rates of sales tax, value-added tax, federal excise duty and withholding tax, customs duties on raw material, additional customs duty and regulatory duty besides local and provincial taxes, said Umair Petrochemicals CEO Ibrahim Kasumbi.
“More regulations and stifling rules will further discourage fresh investment in the industry,” he added.
“Industries in Pakistan are still growing and are not yet ready to comply with such rules and deal with discrepancies in monitoring production,” he said, adding, “Such rules will result in harassment and corruption.”
“It will be particularly difficult for SMEs to comply with new rules in addition to the existing complex tax regime, resource constraints and lingering effects of Covid-19 on all businesses,” he highlighted.
The KCCI chief stated that they feared that amendments to tax laws through the Finance Bill 2020 and scores of notifications and SROs amending rules and procedures issued by the FBR would further squeeze taxpayers.
He added that despite having discretionary powers, tax offices and field formations of the FBR had failed to achieve any significant increase in the number of taxpayers, other than those who were forced to pay withholding tax on various transactions.
Kasumbi pointed out that earlier, by inserting new provisions 56A/56B in the Income Tax Ordinance, the FBR had acquired unrestricted access to personal data and occupational activities of all citizens in Pakistan. “Yet the officers of Inland Revenue rely more and more on squeezing the trade and industry, which is already contributing a major share to the national exchequer.”
“If this continues, the government will fail in its efforts to improve the economy,” he said.
The KCCI chief commented that on the one hand the government had given an amnesty to the construction and real estate sector but on the other an exact opposite policy was being followed, which would stifle all other industries that badly needed ease of doing business to overcome the losses suffered in 2020 due to Covid-19 and global economic slowdown.
He appealed to the finance adviser to intervene and issue directives to the FBR to withdraw such rules and revoke the SRO, which was counter-productive.
He also called for a review of all existing provisions and discretionary powers given to officers of the Inland Revenue, which were misused to harass taxpayers and only served as a deterrent to broadening the tax base.
Published in The Express Tribune, October 8th, 2020.
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