Representatives of all major associations from service sector have threatened the government to shut all services to seaports and airports after 72 hours, if 8 per cent minimum tax is not withdrawn.
Addressing a press conference at Karachi Press Club (KPC) on Wednesday, Asim Saeed Khan, Chairman, Pakistan International Freight Forwarders Association (PIFFA), along with Muhammad Farrukh Iqbal, Chairman Air Cargo Agents Association of Pakistan, Arshad Jamal, Vice Chairman All Pakistan Customs Agents Association (APCAA) and others said that the government through Finance Act 2015 enhanced the rate of minimum tax to 8 per cent, which he termed as unjustified.
He said that although service sector's profit margin was not more than 4 per cent, the government after this tariff enhancement forcing them to pay 8 per cent minimum tax under final tax regime, leaving the whole sector, which generated 0.1 million employment countrywide, in a state of hysteria. He said that they could not afford to pay 4 per cent minimum tax from their own pocket as their profit margin was not more than 4 per cent. Keeping this issue in view, all major associations from service sector after detailed deliberation have decided to give 72-hour deadline to the government to stop enhanced minimum tax implementation and if not, all services to the seaports and airports would be suspended for indefinite period.
Arshad Jamal said that the policy to squeeze the neck of already registered persons was an indication that the government had not only failed to collect revenue but also remained unable to broaden tax base. He said that the government despite tall claims was doing nothing to facilitate importers and exporters that resulted consignment clearance pendency had now reached to 400 containers per day at all terminals, raising disenchantment among the stakeholders.
Arshad said that policy makers, who were unaware about the ground reality, should conduct a research before evolving any policy for trade and added that insertion of section 79 in Customs Act 1969 was a proof that the FBR was running without Research and Development (R&D) department.
Meanwhile, Farrukh, Moin Malik and others said that companies were working on very low margin and could not bear the burden of entire 8 per cent tax on gross payments. They proposed two options to the Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar to resolve the issue.
Option 1: The turnover of "the Companies" may be determined after bifurcation of the gross amount received under the heads 1) Salaries and benefits of the employees and 2) the service charges of the Company. Accordingly, tax is deducted on service charges only. Besides, minimum tax should be rationalised and deducted @ 1% on service charges being the actual turnover of the company in line with the provisions of section 113 of the Income Tax Ordinance, 2001 as well as the concession granted to the advertising and travel agents.
Option 2: Alternatively the present arrangement ie assessment of companies providing or rendering services may be allowed to continue treating the tax deducted on their payments as adjustable tax and excess if any be to be refunded to them along with option to get an exemption certificate in case they have satisfactorily discharged their advance tax liability for the tax year next following. As purposed initially in the financed Bill 2015.
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