KARACHI: The Overseas Chamber of Commerce and Industry (OICCI) has recommended removal of super tax from fiscal year 2018/2019 as such taxation hampering foreign direct investment (FDI) inflows into Pakistan.
In its budget proposals for next fiscal year starting July 01, 2018, the OICCI – representative body of foreign investors in Pakistan – recommended that super tax at the rate of three percent and four percent, which was imposed through Finance Act, 2015, should be deleted.
The other recommendations are as follow:
– The effective Corporate Income tax rate should be 25 percent, w.e.f fiscal year 2018-19, considering the average tax rate of less than 22 percent in Asia.
– Tax rates of the banking sector should be aligned with the corporate sector.
– All Sales Tax rates of the different jurisdictions within the country, should be reduced to 13 percent in line with the average of less than 12 percent in Asia.
– The amendments made in Finance Act 2017 in respect of tax on undistributed profits should be revoked.
– Tax on Bonus shares should be repealed.
– Review of Minimum Tax (MTR) Regime and Abolishment of Alternative Corporate Tax (ACT): a) the general rate of MTR should be reduced to a maximum of 0.5 percent, and 0.2 percent for Oil Marketing/ Refineries/ LNG Terminal Operators and Large Chemical Companies with high turnover and low margins, b) Alternate Corporate Tax under section 113C should be abolished in lieu of Minimum Tax.
– Regulatory Duty levied through SRO 1035(I)/2017 during the year, be withdrawn on imports of raw materials which are not being produced locally.
– The number of rates currently applicable on goods and services for withholding tax purposes, numbering 55, is very complex and cumbersome, which needs to be rationalized, including facilitating the withholding agent through a robust IRIS wherein the visibility of tax deduction certificate should be given to the tax payer.
– Incentive for investment should be made attractive:
- a) Tax credit u/s 65B be enhanced from existing rate of 10 percent to 15 percent of the investment and the date for benefit be extended from existing 2019 to 2022 and factory building associated with the plant and machinery purchased for extension, expansion, balancing, modernization and replacement purposes, should also be included
- b) Industrial undertakings should be allowed to import raw material in the first year of production, without payment of advance tax u/s 148 and for subsequent years, be allowed exemption against advance tax u/s 148 on import of raw material, as per actual requirement, instead of 125 percent quantity of previous year
- c) Tax credit for employment generation u/s 64B, currently restricted to manufacturers, should also be extended to the service sector which contributes about half of the GDP of the country.
– In respect of Group Taxation the law which existed prior to the Finance Act 2016-17 may be restored.
– Coordination between Federal and Provincial Legislations should be streamlined, including synchronization and harmonization of Sales tax rates and policies across all jurisdiction and sectors and should be closely aligned with the regional benchmark of 12 percent sales tax rate.
– The Federal WWF & WPPF law should be updated based on the recent provincial enactments and current minimum wage levels.
– Pending tax refund should be cleared within next six months in an orderly/prearranged manner. All subsequent tax refunds should be cleared within 45 days. Furthermore inter adjustment of Income tax and Sales tax refunds be made part of the law.
– Federal Tax Ombudsman should be entrusted to settle all the disputed claims of taxpayers.
