ISLAMABAD: The Federal Board of Revenue (FBR) is seriously reviewing budget proposals (2021-22) of the banking sector including reduction in corporate tax rate from 35 percent to 29 percent, minimum tax from 1.5 percent to one percent, and compensation on monthly advance tax payment.
According to the budget proposals of the Pakistan Banks’ Association (PBA) submitted to the Ministry of Finance, the rate of minimum tax was increased from one percent to 1.5 percent through the Finance Act 2018, putting additional burden on the taxpayers including banks.
It is therefore, proposed that minimum tax rate be reduced to one percent.
This would provide some relief and support to those struggling businesses including banks, which are burdened with lower or nil profitability and an unreasonably higher incidence of tax.
The PBA has also proposed to the government that the incentives should be provided to companies especially banking companies in the shape of tax credits, if they invest in IT infrastructure or development of human capital.
Banking sector has proposed that the banks should be given KIBOR-based compensation on utilisation of banks' money in the form of monthly advance tax.
The banks incur heavy cost for making advance payments on monthly payments on monthly basis, as compared to quarterly basis by entities other than banks.
The PBA has proposed that the corporate tax rate should be reduced to 29 percent making it in line with the other industries and super tax should be abolished.
Banking sector has proposed to the FBR that the current income tax rate of 29 percent is applicable on microfinance banks. The tax rate should be reduced to 20 percent, since, microfinance industry is supporting the poor and needy customers providing micro loans for agriculture and livestock and also providing advances to micro and small enterprises.
On the issue of Active Taxpayers’ List (ATL), the banking industry has proposed that presently the ATL is updated by the FBR on a weekly basis on Monday, which becomes effective immediately providing no time to banks for its implementation. The ATL should be updated by every Thursday or Friday and made effective from the next Monday providing sufficient time to banks for implementation in system after incorporating necessary format changes.
Law should also suitably amended to affect the above change, the PBA added.
The PBA has also proposed that the restriction of setting-off of tax depreciation to the extent of 50 percent of taxable business income is proposed to be abolished.
The withholding statements prescribed under Section 165 of the Income Tax Ordinance 2001 are required to be furnished within 20 days from the end of the relevant quarter. The timelines to furnish these withholding statements should be extended to two months from the end of relevant reporting quarter, the PBA added.
Under the existing law, the capital loss on shares of listed companies, if not adjusted in the same year, can be carried forward but adjusted against capital gains of the subsequent year.
It has been proposed that the capital loss on shares of listed companies, irrespective of holding period of shares, should be adjusted against the business income in future years, if the same could not be set off in first year, the PBA added.
Copyright Business Recorder, 2021