Tax laws

Tax law amendments proposed for IMF $1 billion tranche – Journal

ISLAMABAD: With an annual revenue impact of over Rs 350 billion, the Federal Board of Revenue (FBR) is seeking changes to the three main tax laws relating to customs, sales tax and income tax , in addition to the Service Tax Act for the Federal Capital to meet International Monetary Fund (IMF) “prerequisites” of securing approximately $1 billion in urgently needed inflows of funds for support of the balance of payments.

According to a summary of tax measures shared with Prime Minister’s Finance and Revenue Advisor Shaukat Tarin for a general briefing to the Federal Cabinet, RBF Chairman Dr. Ashfaq Ahmad explained the key features of the Finance Bill (additional) 2021 to “achieve taxation”. reforms with the help of development partners with the ultimate goal of being able to generate sufficient revenue for the State”.

The supplementary finance bill, along with other tax adjustments, including a 200 billion rupee cut in the development budget and an approximately 50 billion rupee cut in subsidies to special security organizations, is expected to be submitted. for cabinet approval this week.

The complementary finance bill could be presented to the cabinet this week

The underlying objective of the reform exercise pushed by international donors is to “rebuild the tax system on ideal principles of taxation and without any distortion”, as far-reaching structural and administrative reforms had already initiated by the “current government” to “achieve economic and financial stability through inclusive reforms and sustainable economic growth”.

Officials said the chairman of the FBR had proposed the removal of certain powers from senior customs officials, which was interpreted by many in the tax system as the proverbial NRO (National Reconciliation Ordinance) – a term used to grant the amnesty for past actions and deeds.

In terms of revenue generation, the removal of exemptions and the removal of differential rates under sales tax law appear to be the main sources of additional tax. There is a long list of hundreds of items that would attract higher sales tax rates and the application of new tax.

“Under the Sales Tax Act 1990 it is proposed to rationalize the zero rate under the Fifth Schedule and to remove certain entries,” reads the summary seen by Dawn. “It is proposed to reduce the exemption regime under the Sixth Schedule, including the pharmaceutical sector, and limit it to import and local supply of essential products only,” he says. In addition, “it is proposed to rationalize reduced rates of sales tax under the Eighth Schedule on certain items in order to achieve fairness in the tax system,” the FBR chief wrote.

There are hundreds of items in the schedule on which different sales tax rates at one percent, 2pc, 5pc, 6pc, 7pc, 8pc, 10pc and 12pc are currently applicable instead of the standard sales tax rate of 17pc.

“Similarly, it is proposed to streamline the sales tax on the import of high-end mobile phones in CBU (fully built unit) status under the Ninth Schedule,” the FBR chairman said, adding that “the scope of Tier I retailers is also proposed to be streamlined”.

Under the Islamabad Capital Territory (Service Tax) Ordinance 2001, a few notices issued from time to time prescribing reduced rates for certain services have not been consolidated, which is now the case in the annex to the order.

The summary states that ‘minimal amendments to the Income Tax Order 2001 aim to promote the digital economy, documentation and facilitation measures’. In addition, it is proposed to introduce an advance tax on foreign drama serials and to improve it slightly on cellular services.

Disclosure of information regarding senior officials is proposed in the Income Tax Act in accordance with development partner, rule of law and integrity requirements. The tax breaks given to REITs are also extended to their subsidiaries called special purpose vehicles.

“Under the Customs Act 1969 it is proposed to remove the Collector’s power to determine the value of goods imported or exported, to be exercised by the Director of Valuation, which was the case prior to the Finance Act 2021”, explained the head of the FBR.

Similarly, the appeal against the decision of the Director General of Valuation must now be lodged before the judicial authorities instead of the Member Customs (Political) in accordance with the principle of separation of judicial and executive functions. “Additionally, in the interests of revenue, it is proposed to take up the business guarantee as it was before September 15, 2021,” he said.

The amendments to the Customs Act 1969 followed reports that, by Presidential Order – Tax Laws (Third Amendment) Ordinance 2021 – on September 15, the tax authorities had extended the discretion of customs officials to the risk of losses massive income at the import stage. . It was requested that these clauses be considered whether the authors were beneficiaries of the Customs Act changes.

One of these amendments transferred from the Customs Appeals Tribunal to the Customs Policy Member (FBR) the power to hear appeals against the decisions and judgments of the Director General of Customs Valuation, allowing a customs officer to under-assess duties and taxes on arbitrarily low values ​​in his capacity as collector, and then empowering the same officer to ultimately maintain those arbitrary low values ​​in his capacity as appeals authority as customs member.

Posted in Dawn, December 13, 2021