Finance bill: Bureaucracy can devise ‘zero tax’ regime

ISLAMABAD: The Senate Standing Committee on Finance has told the Federal Board of Revenue (FBR) that the Finance Bill 2022-23 empowers the bureaucracy to formulate zero taxation regime for the business community.

The Senate Standing Committee on Finance met on Thursday under the chairmanship of Senator Saleem Mandviwalla. It was given a briefing on the inclusion of budget recommendations of the Senate in the budget 2023-24.

The committee observed that the Finance Bill 2022-23 empowers the bureaucracy to formulate zero taxation regime.

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The committee was briefed by a senior official of the FBR that separate rules will be prescribed for the said purpose.

The committee was informed that the provision will come into play where any case, based on risk profiling is selected for transfer of pricing audit.

The committee maintained that any rules prescribed must be transparent in nature and in the larger public interest rather than self-seeking benefits.

The committee noted that the Finance Bill has extended income tax exemption expiring on June 30, 2023, to June 30, 2024, for residents of erstwhile Fata/Pata which was rejected by the committee.

The committee was told that the government has decided to extend the exemption for one year with the aim of development of the area and ensure employment of the local people.

The committee was told by the official of the Finance Ministry that the Finance Division has received 55 recommendations and the FBR stated that it received 97 proposals and 77 of them were made part of the finance bill, whereas, partial implementation was done on 15 recommendations.

The committee was informed that Rs35 billion has been allocated for USC, of which, Rs5 billion are for the Prime Minister’s Package.

The Finance Division informed the committee that Rs5 billion has been allocated for Prime Minister’s Laptop Scheme and tax was imposed on bonus shares.

The committee recommendations related to the privatisation of loss-making enterprises, increased budget allocation for the health sector, funds for rehabilitation of flood victims, availability of food items at subsidised rates, rise in TV fee from Rs35 to Rs50 per month in electricity bills and mechanism for subsidies on fertilizers, solar energy production and daily food items were fully adopted, however, the ministry partially adopted recommendations such as grant of tax holidays to export industry, laptops schemes etc, explaining that government is providing all necessary support to the IT sector and export-oriented industries.

The matter regarding a decision taken by the Cabinet for closing of Small and Medium Enterprise (SME) Bank was disposed of with the recommendation to the Cabinet to review the matter in the interest of the weak business community and employment associated with it.

It is briefed that the federal cabinet approved the winding down plan of the SME Bank in the best interest of depositors and to minimise the financial losses to the national exchequer.

The committee was further informed that as of 30June 2023, the bank successfully paid an amount of Rs5.227 billion to its depositors and is actively following up with the remaining customers to withdraw their deposits.

Briefing on the matter of imported vintage cars still parked at dry port for clearance was also taken up, the committee lamented that even after the exemption of customs duty, regulatory duty, additional customs duty, Federal Excise Duty, sales tax, and withholding tax by the federal government on 3rd July 2018, the cars have not been released and urged to expedite the matter.

The Revenue Division apprised the committee that since the matter involved the requirements of the IPO 2016, which falls in the domain of the Ministry of Commerce, therefore, it was decided that the matter be taken up in the Senate Committee on Commerce along with the Commerce Ministry and raise the matter with the federal cabinet for relaxation on the IPO (Import Policy order).

The committee also stated that it received letters from some sector that selective LCs are being opened even after all the restrictions are lifted.

The committee also discussed the launch of Pakistan’s first ever digital currency as reported by various newspapers, however, the SBP stated that nothing has been decided yet as it was carefully watching and looking at the central banks which had launched it.

On Hawala/Hundi, the committee remarked that $6 to 8 billion of remittances on an annual basis come through Hundi business. However, the SBP said that remittances of $27 billion were recorded in the last financial year, and the government is taking measures to increase the flow of remittances through the banking channel.

Copyright Business Recorder, 2023