As the collection of duties fall with shrinking imports, businessmen say the Federal Board of Revenue (FBR) is taking steps in despair that are making business conditions worse in the country.
Karachi Chamber of Commerce and Industry (KCCI) President Mohammed Tariq Yousuf, in a statement, requested the Ministry of Finance to extend the last date of tax payment under Section 7E – tax on deemed income – of the Income Tax Ordinance 2021 from December 31, 2022 till such time when all stakeholders mutually found a way out and the issue was amicably settled.
“The business community finds Section 7E, inserted through the Finance Act 2022, contrary to the provisions of Article 142 of the constitution,” he pointed out.
“Under Section 7E, the FBR wants to collect tax on deemed income from the second property of a taxpayer instead of really determining what income he makes or whether the property is sitting idle and yielding no income at all,” remarked former KCCI senior vice president Muhammad Ibrahim Kasumbi while talking to The Express Tribune.
For instance, if a property is worth Rs20 million, the revenue authority will charge tax as per rent it thinks the property is generating.
He emphasised that the businessmen working in the documented sector were submitting all their details to the FBR from where it got information, but it slapped income tax on rent regardless of whether the property was generating income or not.
“FBR is frustrated and taking arbitrary decisions to meet targets,” added Kasumbi.
He emphasised the need for an overhaul of the tax body as it had developed a habit of collecting most of the taxes at the import stage.
“These days, however, it has failed to meet targets, therefore, it is harassing the existing taxpayers instead of going after those who are enjoying exemptions, especially the agricultural sector giants and real estate tycoons.”
He asked the FBR to go after the corrupt and money launderers, who were cleaning their black money, and businessmen, who had bought houses in line with their genuine needs, should not be persecuted.
“Real estate is a dead investment and businessmen cannot afford to put their money idle for long,” he said, elaborating that they wanted to circulate money in order to generate income while tax should be imposed only on the real income and not on deemed income.
KCCI president noted that a petition had also been filed in the Balochistan High Court, which restrained the FBR from taking any coercive measures while court proceedings were underway.
Hence, “the last date of tax payment should be put off until the constitutionality of Section 7E is decided”, he stressed and mentioned that many taxpayers had not been able to file tax returns due to the ambiguity.
“Consultation must take place between the business community and the FBR to enable all stakeholders to jointly find a way out of this issue.”
Published in The Express Tribune, December 25th, 2022.
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