ISLAMABAD: The Federal Board of Revenue (FBR) chairperson Nausheen Javaid Amjad Tuesday said for the first time in history of Pakistan, the government had presented a budget without any taxation measures for 2020-21.
Addressing the Institute of Chartered Accountants of Pakistan (ICAP) post-budget conference 2020, the FBR chairperson who was the guest of honour at the event, said no new taxes had been imposed in the budget.
The objective is to mobilise revenue by keeping a balance for the business community.
There were a lot of expectations of the business community, but we have limited fiscal space.
The budget has focused on documentation measures, broadening the tax-base, simplification of taxes, automation and reduction in cost of doing business.
Unfortunately, the things nosedived after the Covid-19 pandemic. Prior to Covid-19, there was 17 percent growth in the FBR revenue during current fiscal year.
Income tax growth was 18 percent, sales tax growth 25 percent, the Federal Excise Duty (FED) growth 21 percent, and customs growth was -4 percent due to import compression.
For the first time, the growth on imports have shown a minus trend, but domestic Inland Revenue taxes shown handsome growth of 27 percent.
After Covid-19, the FBR is anticipating a growth of only 3-4 percent in revenue during last month of the current fiscal year i.e. June 2020.
"We have sought flexibility from the IMF," the FBR chairperson said.
Nausheen said the hallmark of the federal budget (2020-21) was to take measures for reducing litigation between the FBR and the taxpayers, revamping of the Alternate Dispute Resolution mechanism and re-introducing the concept of agreed assessment to avoid appeals and courts.
The FBR chairperson said the hallmark of the federal budget (2020-21) was to take measures for reducing litigation between the FBR and taxpayers, revamping of the Alternate Dispute Resolution mechanism and re-introducing the concept of agreed assessment to avoid appeals and courts.
Through these measures taken in the budget, the revenue stuck in courts, and appeals would be recovered through the ADRC.
Nausheen said the ultimate target of the FBR's point of sale (POS) system was to integrate up to 25,000 retailers with the FBR's computerised system.
The POS has been installed at the 6,616 retail outlets and the FBR will achieve the target of installing the POS system to 15,000 retailers under Tier-I category.
The FBR chairperson said that the budget had been prepared in unusual circumstances having entirely different dimensions of taxes.
She said the concept of agreed assessment through arbitration by Assessment Oversight Committee, and strengthening Alternate Dispute Resolution mechanism would ensure increase in revenue without going into appeals.
FBR chairperson stated that to strengthen the alternate dispute resolution process, and to make it more taxpayer friendly, it was proposed that the taxpayer was allowed to withdraw his case from any court of law or any appellate authority after a decision of the ADRC. Furthermore, the decision of the ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities.
Referring to e-Audit, she said the selection of cases for audit had been revamped.
About refunds, Nausheen said Rs48 billion sales tax refunds had been issued other than FASTER during the current fiscal year.
The FBR chairperson admitted that the payment of income tax refunds was slow, but Rs5 billion income tax refunds had been issued (Rs1 million to Rs5 million claims).
This is subject to the condition that the claims are valid and the IBN has been provided by the taxpayers.
The tax authorities have requested the FBR to provide the IBAN of their bank accounts for receiving refund payment through online system. The FBR chairperson assured the business community that the anomalies in taxes would be removed with the help of two anomaly committees constituted by the FBR.
Editor of Business Recorder and BR Group chief executive Wamiq Zuberi said the government should ensure providing liquidity to the small and medium enterprises (SMEs).
The government should adopt the definition of the State Bank of Pakistan (SBP) for SMEs because they are more vulnerable, Zuberi added.
Wamiq Zuberi was of the view that the thrust of the budget should be saving the businesses during this Covid-19 situation for saving jobs of millions of the people in the country. This year the template of budget is based on the IMF's matrix of Rapid Financing Instrument (RFI), which is not a valid base, BR Editor said.
Wamiq Zuberi added that the government needs to decrease interest rates to ensure more fiscal space. Presently, Pakistan is facing real problems on the external side including exports.
Panelist Siraj Kassam Teli stated that the focus of the budget should have been survival of the businesses. We have been requesting the FBR to temporarily reduce rates of sales tax, income tax, federal excise and withholding taxes for a period of one year. But our proposals have not been incorporated, Teli said.
We have also requested to reduce utility rates and interest rates to create cash flow and our proposals were again not made part of the budget. The government should immediately revise the budget to ensure survival budget for the business community, he added.
Former president of ICAP Asad Ali Shah proposed that the interest rates be reduced by three percent; government should request the IMF, G20 and Paris Club to defer payments for one year; reduce taxes for service providers such as hotels closed for the last many months, and reduction in tax rates, which were the highest in the world.
In a situation when the businesses are closing, how they would be able to pay taxes to the FBR? he asked.
Ashfaq Yousuf Tola, chairman Economic Advisory and Government Relationship Committee, ICAP, council member, ICAP also addressed the conference.
Anjum Nisar, panelist and FPCCI president stated that it was a status quo budget and "we are heading towards closure of business and trade during the current economic situation."
Panelist and partner EY Ford Rhodes Haider Patel disclosed that the FBR had made some amendments against the concept of Universal Self Assessment Scheme.
The amendment relating to the revalidation of income tax returns by the department would result in disputes.
It seems that we are going back to the Income Tax Ordinance of 1979, and this would create problems for the taxpayers.
Giving a presentation on indirect taxes, AF Ferguson and Co Chartered Accountants partner Asim Zulfiqar informed the conference that it would be very difficult for the FBR to achieve 27 percent growth in revenue during 2020-2021.
Indirect taxes comprise 59 percent of the total tax collection.
If withholding taxes are made part of the indirect taxes, it would comprise 80 percent of the total collection.
Around 55 percent of the sales tax is collected from the import stage.
There is a dire need to increase the number of sales tax registered persons.
The number of registered persons stood at 232,200 and sales tax return filers are 147,000. Moreover, the FBR has taken measures to minimize the gap of tax evasion in 2020-2021.
Kamran Iqbal Butt, panellist and partner, Tax and Advisory Services KPMG in Pakistan shared data of tax projections for 2020-2021.
The sales tax target has been set at Rs1,919 billion and income tax target at Rs2,036 billion for 2020-21 reflecting a growth of 34 percent and 26 percent respectively.
The targets set for the FBR are ambitious for 2020-2021.
Saqib Masood Partner & National Head of Tax KPMG Taseer Hadi & Co. apprehended that there might be mini-budgets or supplementary budgets during current fiscal year.
It would be very difficult for the FBR to achieve this very aggressive revenue collection target for 2020-2021.
The target of Rs4.9 trillion requires 27 percent growth in revenue, which is very challenging.
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