Friends of Business and Economic Reforms President Kashif Anwar, while raising his serious concern over the newly-promulgated Presidential Ordinance, has called for industry-friendly taxation regime.
Kashif Anwar said this Ordinance provides relief to the retailers and distributors only, imposing more restrictions on manufacturers, which is the actual base of economic growth of any country. He said that without CNICs condition, the FBR has come up with an alternative plan through Presidential Ordinance which would not allow input adjustments to those manufacturers who would sell Rs10 million goods on monthly basis to unregistered buyer.
He said that the objective of this amendment through Presidential Ordinance is to bring major distributors into tax net but restrictions were not imposed on distributors or retailers rather the manufacturers have been restricted to do the job of FBR, creating problems for the industry which is already in trouble due to multiple issues.
According to FBR, the big distributors who made purchases from Rs10 million on monthly basis to Rs100 million on annual basis, the manufacturers would not be granted input adjustments if they would sell their products to unregistered persons.
"The limitations must have been on retailers that they cannot make purchases of over Rs10 million if they are unregistered. It is just stupid and unfeasible," he added.
"In my opinion, through ordinance the authorities have attempted to create rift among the business community so that they could not be united. Traders have been told that they have got maximum benefits but manufacturers were asked to make the traders registered, which is actually the task of FBR itself" he said. He said the FBR wants manufacturers to pressurize the traders for documentation.
Kashif Anwar said that through this ordinance, the discretionary powers of tax officials have enhanced which will pave the way for misuse of powers and corruption, asking the FBR not to harass the business community but find new taxpayers in order to increase the revenues. FBR should motivate the staff, introduce the latest technology, plug loopholes and find new taxpayers to end the country's dependence on foreign loans, he added.
The new powers of FBR officials have terrified the business community that needs to work with peace of mind. He asked the FBR chairman to plug loopholes causing tax evasion and other irregularities and employ the latest technology to enhance collections without hurting the existing taxpayers. He said that misuse of authority can be stopped by revisiting certain laws, rules, and regulations to document the economy and increase the tax base to boost the volume of revenue.
International practices should be adopted so that no one gets the impression of a repressive tax regime, he demanded. FBR should be brought at par with the tax authorities of the developed countries without which a country cannot climb the ladder of success. We have a complex tax system which lacks transparency. While some laws continue to obstruct the growth of tax broadening, he said.
According to the new ordinance, strict penalties, imprisonment and punishments have been introduced for violations, including Penalty for Persons who violate FBR Integrated Software for Sale or Track and Trace System, Penalty for violation of Printing requirement of Retail Price, Penalty for violation of Section 40D, he said.
He said the government should take short-and long-term measures to gradually enhance Tax-to-GDP ratio from 13 percent to its actual potential of 26 percent, as the low ratio is mother of all economic ills such as higher tax rates; tax evasion; thin tax base; exponential increase in parallel economy; revenue shortfall.
He said that only 1.8 million returns were filed in 2018, which underscores the need to bring all the sectors of the economy in the tax net and wherever the income is generated be taxed with political will. At present, manufacturing sector is overly burdened by paying 62 percent of the total taxes in comparison to its contribution (20.3 percent) in GDP, whereas agriculture and service sectors share in tax payment is one percent and 37 percent, respectively, although their contribution to GDP is 19 percent and 60 percent, respectively, he said.
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