Revamping Tax System Only Way To Sustain Future Revenue Needs, Urges OICCI

Karachi, April 3, 2013: Overseas Investors Chamber of Commerce and Industry (OICCI) urged substantive tax reforms in its 2013 – 2014 proposals submitted to the Federal Board of Revenue (FBR). The trade body has also forwarded general and industry-specific suggestions to broaden and rationalize the country’s revenue base to help overcome the prevailing economic crunch faced by the country.

The proposals include implementation of a consultative tax and revenue enhancement regime involving all key stakeholders, using every legitimate means to withdraw tax and duty exemptions as well as amnesty schemes, barring those impacting the poor, effective monitoring and scrutiny to identify tax evasion and, notably, bringing agricultural income into the tax net.

Referring to salient measures its proposal would entail, OICCI suggested:

  • FBR to come up with a five year tax and revenue enhancement strategy with the engagement and approval of all key stakeholders.
  • To boost corporatization a uniform tax rate be applied to all business income, irrespective of the legal structure of the business entity.
  • Gradual reduction of sales tax rates to encourage documentation. Moreover, there is scope for further rationalization of the exemptions in Sales Tax system.
    • Companies registered in Large Tax Units (LTU) should be exempt from withholding tax regime.
    • Minimum tax be eliminated for companies with a high turnover and low profit. 
    • All Sales Tax refunds should be settled within an agreed time time-frame of 30 days.
    • FBR should de-notify the services which are now chargeable under the provincial legislation after the 18th constitutional amendment.
    • Additional fiscal and industrial incentives to be offered to encourage Foreign Direct Investment in manufacturing activities, in line with the global practices.
    • Claim of input tax by registered persons should not be tied to deposit of sales tax by the supplier, as the buyer cannot ensure the deposit of the sales tax by the seller.

Cognizant of the popular fallout of the systemic revamp it has proposed, OICCI concedes that revamping the taxation system will require collective political will and resolve on the part of government, law and decision makers.  

OICCI proposals also include significant suggestions to broaden the tax base of the country including but not restricted to:

  1. All individuals, traders and organizations to file income tax return and statement of net wealth. 
  2. FBR to have the ability to  seek details of all customers of financial institutions whose account shows turnover in excess of Rs one million during the year.
  3. Amendment in Section 111(4) of the Income Tax Ordinance to restrict tax free inward foreign remittances to a maximum of US$ 10,000.
  4. Effective use of all database to identify potential tax payers.
  5. Implementation of Reformed sales tax/ VAT.
  6. Simple and effective automated tax collection be introduced to eliminate inefficiency and corruption.
  7. Retailers should be brought into normal tax regime and electronic cash registers should be made mandatory at all retail outlets without any turnover thresholds.

With 190 members from 33 countries operating in 14 key sectors in Pakistan and contributing over 20 percent to the country’s Tax collection and GNP, besides large-scale indirect employment, OICCI represents the collective voice of large foreign investors in the country.

For further details please visit the website www.oicci.org or call Mr. Moin Mohajir at 021 32472414.

© 2012 Overseas Investors Chambers of Commerce and Industry
The Overseas Investors Chamber of Commerce & Industry (OICCI) serves as the national point of reference for foreign investors in Pakistan. Established in 1860 as the Karachi Chamber of Commerce, it is the oldest of the existing chambers.