KARACHI: Pakistan Banks Association (PBA) has proposed the Federal Board of Revenue (FBR) to restore original provision of Advance Income Tax for banks through which the banks can file lower estimates of tax liability.
In its budget proposals for the 2014-15, the PBA has proposed that the FBR in June 2012 issued SRO 561(1)/2012 whereby the right of the banks to file estimates of lower tax liability for the purpose of payment of advance tax under section 147(6) has been withdrawn. SRO 561(1)/2012 should be withdrawn. The original provision of Advance Income Tax should be restored for banks through which banks can file lower estimates, if required.
The rationale for proposal is amendments made through the aforesaid notification has deprived the banks, inter-alia, from their right to file estimate of lower tax liability which is available to all other categories of taxpayers. There is no rationale for different treatment.
The Federal Tax Ombudsman in its order has declared SRO.561 (1)2012, on payment of advance tax by banking companies, as unlawful with an observation that the introduction of an SRO that has the effect of amending the statute being contrary to law tantamount to maladministration, PBA added. PBA further proposed restoration of the original provisions related to bad debts-Seventh Schedule of the Income Tax Ordinance, 2001.
It proposed that the provisions for advances and off balance sheet items shall be allowed up to a maximum of one percent of the total advances, [and provisions for advances and off-balance sheet items shall be allowed at the rate of 5 percent of total advances for consumers and small and medium enterprises (SMEs) (as defined under the State Bank Prudential Regulations)] provided a certificate from the external auditor is furnished by the banking company to the effect that such provisions are based on and are in line with the Prudential Regulations. Provisioning in excess of 1 percent of total advances for a banking company and 5 percent of total advances for consumers and small and medium enterprises (SME5) would be allowed to be carried over to succeeding years.
