KARACHI: Pakistan Business Council (PBC) has submitted proposals with federal government for promoting scale, competitiveness, formalization and investment. Also, the business advocacy body has urged the government to take various measures for the export promotion under its ‘Make in Pakistan’ thrust.
In a letter to the Federal Minister of Finance and Revenue Minister Shaukat Tareen, The PBC Chief Executive Ehsan A. Malik said: “We thank you for attending PBC’s dialogue on the economy last month where you suggested an offsite meeting with the PBC to discuss proposals to promote scale, competitiveness, formalization and investment. We wait to hear from you on when you would like to discuss further. In the context of PBC’s “Make-in-Pakistan” thrust, we have also included our proposals for promoting exports, some of which are in your ministry’s domain and the rest would be of interest in your role in the cabinet, the EAC and the ECC.”
PBC said the Group Company Laws which were enacted in 2007 were aimed at consolidating businesses for scale through the Holding Company Structure. Constant revenue enhancing changes in the laws have compromised the original spirit behind the laws.
The relief clause of 103C be reintroduced to encourage formation of business groups. To distinguish relief from multiple taxations from income tax exemption, it is proposed that a new subsection be inserted in section 59B as under: Distribution of dividends within companies eligible for group relief under this section shall not be deemed a taxable event. This is in line with established global practice of protecting intercorporate dividends from multiple taxations.
Under Section 65B of the Income Tax ordinance, tax credit for investment at 10% on new investment in plant and machinery for new projects and for BMR was curtailed till June 30, 2019, following which it was withdrawn. Finance Act 2019 may be withdrawn and the credit be made available at 10% till June 2025 to encourage industrialization and job creation.
Under Section 65C of Income Tax ordinance, tax credit available for new listings on the stock exchange available till 2022 at a rate of 20% in the year of listing and 10% for each of the following two years was withdrawn in the Finance Act 2021. It recommended that erstwhile Section 65C of the Income Tax Ordinance be restored, subject to a 25% minimum free float throughout the year for which the tax credit is claimed.
Pass through status of PE and VC Funds was withdrawn through deletion of clause 101 of ITO 2001 in the Finance Act, 2021. PBC recommended that Clause 101 of the ITO 2001 repealed by FA 2021 be restored with certain amendments.
Illicit (and unaccounted) trade in all its manifestations has a significant impact on government revenues, sales and profitability of the formal sector, and in many cases a harmful effect on consumer health. It urged the government to engage the private sector in a “win win” consultative process to thwart illicit trade with adopting certain measures.
Whilst Climate Change is a broader challenge, there is no organized effort in the formal sector for promoting collection, recycling and reuse of waste material.
PBC suggested the government to accord recycling a pioneer industry status to promote formalization and professionalism. Allow duty free import of equipment and provide tax holiday for 5 years to this industry.
Under Income Tax sections 122, 176 of the ITO, 2001 and Sections 11 and 25 of the STA, 1990, notices for audit issued are of a “fishing” nature without definite information. These create undue hardships for taxpayers. It is recommended that the powers to initiate proceedings under section 122(5A) of the Income Tax Ordinance, 2001 be withdrawn or be issued only with the approval of the Member IR. Furthermore, they be based on substantive information.
Neither FBR or the PRAs publish data relating to customs valuations and sales tax & excise duty paid by individual entities. There is an incentive to not only under-invoice imports but also to under-report production and sales. There are several lucrative businesses in the services sectors (restaurants, cinemas, hospitals etc,) which are not required to be linked with the FBR’s POS system. The POS systems for all entities registered with PRAs should be linked with the FBR’s POS system.
Copyright Business Recorder, 2022