New projects/capacity expansions: Government urged to remove restrictions on issuing exemption certificate

Budget makers have been recommended to remove restrictions on issuance of exemption certificate for new projects/ capacity expansions / formula and process changes for industrial growth in the country.
Ashfaq Yousuf Tola, FCA, who is also Chairman ICAP Committee on Fiscal Laws, told Business Recorder that under the current law, tax exemption is conditional upon payment of tax on the basis of preceding two years' tax liability. The said condition to meet the tax payment equal to previous two tax years be abolished and the same should be linked with payment of advance tax liability for the respective period (i.e. similar to the condition prescribed for exemption under section 153).
He said that ICAP's Committee on Fiscal Laws had organised National Tax Conference, considering various taxation issues hindering the growth of Pakistan's economy.
These issues need immediate attention of the new government, which is determined to put the country on the path of prosperity.
Though there are numerous issues on this account, the committee considered those issues that have negative impact on the growth of business and industry in Pakistan and require policy shift to get the benefits, both in short and long terms.
Primarily, these recommendations focus on harmonisation of fiscal laws across the country and tax reforms, both in terms of policy and operations, leading to ease of doing business in Pakistan.
These recommendations, if taken in the budgetary process by the government, would lead to prosperity for Pakistan not only through increase in domestic investments, but will also attract foreign direct investment, Ashfaq Tola added.
According to the key recommendations of the Institute of Chartered Accountants of Pakistan (ICAP), the integration of all tax revenue authorities in such a way that each authority may maintain its existence but should provide one window solution for the taxpayer not only enabling inter-adjustment of refunds but also one return for both federal and provincial taxes.
The invoice verification software STRIVE should be implemented at provincial level also along with integration with federal return.
The FBR is practically not allowing refunds for provincial sales tax, owing to settlement disputes/claims pending with provincial tax authorities. Further, unnecessary notices are issued against input tax claims, on account of non-verification of provincial sales tax in FBR's system. This issue needs to be taken up with provincial sales tax authorities for its resolution at the earliest.
The basic source for broadening tax base is financial transactions carried out by the persons who avoid filing tax returns.
All major financial transactions require CNIC number and FBR should remain in touch with these authorities/offices to collect information.
A proper mechanism should be introduced in law to bring the potential unregistered persons whose information is available in the shape of NTN/CNIC through withholding provisions.
Further, all the bank accounts (including existing bank accounts) should mandatorily be tagged with tax registration. As such, banks should only open accounts of traders and shopkeepers (including sole proprietors and association of persons) having trade licence and / or proper tax registration.
Commercial connections of gas and electricity provided to those who are non-filer should be discontinued.
The ICAP encourages setting up of separate Directorate for International Taxation and special unit (Automatic Exchange of Information - AEOI) for dealing with cases arising out of exchange of information. However, AEOI requires further strengthening of resources and integration with local data base for broadening of tax base.
All these requirements should appropriately be included and made part of the relevant laws.
There is a serious need of brining taxation of agriculture income under a more transparent and documented manner. Capacity building of provincial authorities is required to be undertaken by federal government.
Though taxation of agricultural income may remain with provinces under the constitution, there is no bar on federal government in documenting agricultural income so that the agricultural assets and income earned therefrom are identified and not used for underreporting and mis-declaration.
The ICAP added that some mechanism should be developed to stop all types of unfair treatment with existing taxpayers e.g. explanation of each and every credit entry in the bank statements.
Further, a Taxpayer Facilitation Card should be issued and a preferential treatment should be given to individual taxpayers paying taxes above a particular threshold in a year (say tax of Rs 1 million or above). Filers should at least be given priority treatment at various infrastructural facilities e.g. NADRA, excise and taxation when registering motor vehicles, courts of law, airports, etc.
The Finance Act 2018 brought about certain amendments in the Income Tax laws to tax supply of goods by a non-resident in case of overall arrangements for Engineering, Procurement, Construction and Commissioning (EPCC) even if the supply is made outside Pakistan.
The said amendments as introduced through the Finance Act 2018 are not consistent with the international tax laws.
It is suggested to reconsider such amendments in order to align it with international tax laws.