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ISLAMABAD: The members of the Senate Standing Committee on Finance have deplored that businessmen are not willing to pay taxes and everyone is coming to the committee for tax exemption, while the entire burden of taxes was either borne by the salaried class or the common man.

These remarks were made by Senator Farooq H Naek and others during a discussion on the Finance Bill 2021 by the Senate Standing Committee on Finance presided over by Senator Talha Mahmood, on Thursday, after members from various business communities turned up in the committee to seek its help either for retention of exemption or reduction in duties.

“Taxes are either being paid by the salaried class or the common man, whereas businessmen are unwilling to pay taxes,” said Naek, after Ashfaq Tola and others turned up in the committee, and complained that income tax exemption on Modaraba was proposed to be withdrawn.

Although, the Federal Board of Revenue (FBR) members and other senior officials stated that withdrawal of corporate sector exemption was part of the reforms agreed with the International Monetary Fund (IMF), the chairman of the committee and some other members opposed it and recommended its restoration in the previous shape.

Tola argued that as per agreement with the IMF, income tax exemption should have been withdrawn on charities, mutual funds etc, while in the finance bill, exemption was withdrawn from Modaraba only. The FBR said that eliminating tax exemptions was part of the reform programme. Member of the FBR also briefed the Committee on the matter, dealing with the business accounts.

According to the bill, business accounts will now have to be declared to the FBR. One who does not declare its accounts will be penalised. The minimum fine will be Rs0.1 million and imprisonment. The chairman committee sought revised details from the FBR regarding tax on transaction. The FBR Member Customs (Policy) stated that customs duty on pharmaceutical raw materials was zero and other measures have also been proposed in the finance bill to provide incentives on raw material and intermediary goods to run the production sector at full capacity to achieve five percent GDP growth in the next fiscal year.

The National Tariff Commission Chairperson, Rubina Athar, told the committee that there are four main sectors of the value added chain of textile sector and the government focus is only value added chain.

She added that from the last two years, the focus was to bring down the raw material tariff so far, customs duties on 2,000 raw materials have been abolished, besides additional customs duties and regulatory duties have also been reduced.

This year, Athar added that duties on some items have been reduced to zero. She said that in the textile sector, the whole chain was rationalised with the purpose to increase exports. The National Tariff Commission chairperson, while briefing the committee, said that tax duties on all raw materials have been significantly reduced.

Textile exports are targeted to increase by 4-5 billion next year. She said that all the proposals related to reduction of custom, additional custom duty and regulator duty are taken up by the Tariff Policy Board for detailed discussion before making any proposal.

During the meeting, officials from the FBR informed the committee that the government has decided to abolish the tax on the import of point-of-sale machines because it would help document the economy and increase revenue collection from the retail sector. Large retail stores will be able to import duty-free machines. The meeting was told that import duty on card reader machine used for credit/debit card was also proposed to be removed. Banks will also be able to import machines at zero duty, the FBR senior officials added.

They further stated that installation of point-of-sale machines will increase revenue and document the business activities.

The FBR also apprised the committee that the customs duty on 240 chemical tariff lines has been reduced. Five percent duty on 240 types of raw materials related to pharmas has also been abolished. Duty on HRC steel product was also proposed to be reduced, the meeting was further informed. The duty on import of tourism-related machinery and other related equipment was also proposed to be reduced from 70 percent to 50 percent to promote the tourism industry in the country.

The meeting decided to call the Ministry of Industries and Production and the Engineering Development Board (EDB) to explain why the prices of locally-made vehicles are so high and local industry was developed so far in the country under deletion programme after some members stated that Pakistan is the most expensive country in terms of car producers.

Saleem Mandviwalla said that car manufacturers import the whole car in complete knock down (CKD) form and only assemble it in Pakistan. The committee members stated that the government was providing incentives to the auto industry but like the pharmaceutical industry, they do not pass on the benefit to the consumers. The FBR apprised the committee that the regulatory and additional customs duties have been exempted on vehicles below 850cc vehicles.

Duty on import of auto kits has been reduced from 30 percent to 15 percent for the promotion of local auto sector. The FBR officials stated that the duty on pharmaceutical raw material was proposed to be reduced to zero. Upon this, the members of the committee said that on the one hand, the pharmaceutical industry was seeking zero duty on raw material, whereas, on the other hand, it was increasing medicine prices.

The officials of the FBR said that there are two categories of manufacturing SMEs (small and medium enterprises), Category One has a turnover of Rs100 million, while Category Two has a turnover of Rs250 million. Senator Mandviwalla has expressed objection to the current turnover. The Committee members, unanimously, said that the turnover was 250 million, 14 years ago, and should be increased now.

The committee proposed to increase the turnover of SMEs to 400 million. The committee has decided to summon the Drug Regulatory Authority on the issue of medicine prices and put off the proposals after Senator Faisal Sabzwari stated that the committee must be held out an assurance that reduction in duty on raw material would result in decrease in medicine prices.

To a point raised by Tola that a number of people have been unable to pay the fourth installment of 2019 Tax Amnesty Scheme due to coronavirus, the FBR and Senator Naek stated that as it was allowed through an Act with a cutoff date; therefore, legislation would be required to allow those who have been unable to pay their installment either through a private member bill and bill moved by the government.

Copyright Business Recorder, 2021

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