ISLAMABAD: The Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the Federal Board of Revenue (FBR) to remove anomalies and simplify tax system to encourage investment in the country.
In a letter to Chairman Federal Board of Revenue (FBR), Secretary General OICCI Abdul Aleem said that if OICCI’s taxation proposals are implemented in letter and spirit, it would facilitate FDI, promote the ease of doing business and documentation of the economy. It would also be helpful in broadening the tax base and enhancing revenue collection in proportion to the economic potential of the country.
The letter also pointed out that the OICCI members are fully supporting the government to deal with the current economic pressures and have, therefore, deferred requests for a number of taxation relief measures that would be justified under normal circumstances.
According to the letter, taxation proposals have called for review of the Minimum Tax Regime (MTR), with the general rate of minimum tax under section 113 of ITO 2001 to be reduced to 0.25%.
For businesses dealing in sectors with high turnover and low margins, (e.g. oil marketing/ refineries/ LNG terminal operators, large chemical companies), this rate should be applicable on gross profits instead of turnover. Further, Alternative Corporate Tax under section 113C should be abolished in the presence of minimum tax under section 113.
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The OICCI also demanded that relief from multiple taxation of Inter-Corporate Dividends (ICD) in Eligible Group Structures be reinstated [section 59B]. The relief on ICD dividends was inadvertently treated as an exemption and withdrawn via the Income Tax (Second Amendment) Ordinance 2021, even though it is in line with established global practice of protecting ICD dividends from multiple taxation.
The letter says that in meetings with top government officials last year as well, the OICCI had shared that the withdrawal of ICD relief has resulted in multiple taxation of same income which will adversely affect corporatisation and competitiveness of local business groups and prove to be counterproductive to the government’s vision of promoting investment in Pakistan.
“FBR must work towards simplifying the complicated withholding tax regime and focus on use of technology to substantially facilitate all stakeholders”, and abolish undue recurring audit reviews and recovery proceedings, he added.
Besides presenting some industry specific proposals, the OICCI has urged the government to use information collected by the tax compliant sector of registered/unregistered businesses as a tool for broadening the tax net, instead of penalising tax compliant sector with no revenue benefit to the government exchequer.
Copyright Business Recorder, 2022
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