Businessmen slam punitive laws

Pakistan's leading business chambers on Friday asked the government to immediately suspend the laws that authorise the arrest of taxpayers on allegations of fraud and penalise the use of cash for over Rs200,000 worth of business transactions or else they will begin an agitation campaign.

The demands were made from the platform of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in the presence of Minister of State for Finance Bilal Azhar Kayani and members of the Federal Board of Revenue (FBR).

Finance Minister Muhammad Aurangzeb did not attend the FPCCI meeting, where representatives of almost all the chambers and associations were present.

The business community wants the immediate withdrawal of the FBR's authority to arrest people on allegations of fraud, powers to add back 50% of cash expenditure above Rs200,000 in income and depute taxmen in factories, said FPCCI President Atif Ikram Sheikh.

Sheikh demanded that the FBR's discretion to determine input adjustment and the enforcement of electronic invoicing should also be suspended.

The government has taken these measures to minimise the use of cash in the economy and to crack down on tax fraud.

"A thief will be called a thief but we will ensure that the law is not wrongly applied," said Minister of State Bilal Kayani while responding to demands from the business community. He stressed that those powers could not be suspended until the law was amended by parliament.

"We may not agree with everything that the business community has demanded but discussions will continue in the coming days," said Kayani while indicating the government's resolve to withstand the pressure from the traders and business leaders.

The easiest thing was that the government should have left the arrest powers in the hands of assistant commissioners but it introduced safeguards in it, said the minister of state. He added that the explanatory memorandum on budget would be issued on coming Tuesday, which should address some of their concerns.

The FPCCI president said that the business community wanted to resolve the issue through negotiations but other participants of the meeting threatened to go on strike from July 19 if those powers were not withdrawn.

Kayani said that there were many businesses that did formal transactions but there were others that dealt in cash and those should not be rewarded.

According to new Section 21S and Q of the Income Tax Ordinance, 50% of the expenditure claimed in respect of sales, where the taxpayer received payment exceeding Rs200,000 otherwise than through a banking channel or digital means against a single invoice containing one or more than one transactions of supply of goods or provisions of services will be treated as income.

Section 21(q) states that 10% of the claimed expenditure attributable to purchases made from persons who are not National Tax Number (NTN) holders shall be disallowed.

These steps are taken to discourage the use of cash in business transactions.

"People are extremely angry and it is getting difficult for us to control them," warned FPCCI Patron-in-Chief SM Tanveer. He said that the economy was passing through a difficult phase for the past two years and the government had chosen to harass taxpayers in the middle of this.

"We do not want a strike on July 19 but the message from the government is that the FBR is the new NAB," said Sohail Altaf, a leading business leader from Rawalpindi. He warned that if the agitation began, it would be difficult for the government to reverse the negative perception.

Saqib Fayyaz Chohan, another business leader, said that if the FBR did not withdraw the arrest powers and continued the implementation of e-invoicing, it would be difficult for them to move along.

FBR Member Operations Hamid Ateeq Sarwar explained that those powers were only meant to be used against the people involved in tax fraud through fake sales tax invoices. He said that the adding-back income clause would also not impact return filing for tax year 2025 and any such question would be asked next year.

Pakistan Vanaspati Manufacturers Association Chairman Sheikh Omar Rehan said that the FBR had deputed its staff in ghee factories that paid taxes at the import stage, urging them to withdraw the officers immediately.

Sardar Tahir Iqbal, a representative of the real estate sector, said that the Capital Development Authority (CDA) chairman violated the prime minister's instructions and increased transfer fee charges from Rs250 per yard to 3% of the property value. He said that this single increase denied the benefit of reduction in withholding tax rates for the buyers of properties.

Ajmal Baloch, who claimed that he had support of 12.5 million traders, threatened to go on strike if the powers to arrest and add-back income were not withdrawn immediately.