The Federal Board of Revenue (FBR) Chairman, Dr. Muhammad Ashfaq Ahmed, has disclosed that the FBR will present a new ‘tax policy framework’ to the federal cabinet to impose a ban on the ministries/divisions for proposing tax incentives or exemptions.
He was responding to a query on vehicles raised by the official of the Engineering Development Board (EDB) before the Senate Standing Committee on Finance.
The FBR chairman stated that FBR has finalized a new tax policy framework on exemptions which would be taken to the Cabinet for approval. Under the new tax policy framework, no ministry/division would be allowed to propose tax incentives to any specific company/sector, etc.
He added that the policy has been drafted to discourage the practice of tax exemptions in the future.
The Senate Standing Committee on Monday finalized the recommendations on the Finance Supplementary Bill 2021, for the report to be laid in the Committee for final review and approval by the committee members today, 11 January 2021. The Senate Panel unanimously rejected the imposed tax on “nan” and “bread” including the one prepared in bakeries.
“Bread is consumed by all classes of society, children of the middle-class society use them for lunch” Senator Farooq Hamid Naek stated while debating on the proposed amendment. The committee also rejected the proposed imposition on Yogurt, Butter, Desi Ghee, and Milk, by majority vote, while the tax has been imposed on flavored milk, cheese, cream, and whey.
The Representative- Supreme Council of Export Processing Zone requested for the exemption of sales at the import stage in EPZ on the analogy that it will reflect of sales tax at import stage in the Export Processing Zone.
“18 to 20 Trillion retail sales are taken place in the country out of which only 4 trillion is accessible. 16 trillion retail sales are out of tax-net”, Stated Minister for Finance while addressing the Senate Standing Committee on Monday.
The Committee unanimously rejected the insertion of the definition of digital mode of payment as per the State bank of Pakistan, on the plea that digital payments cannot be enforced.
The Senate Standing Committee on Finance Revenue and Economic Affairs met on Monday to finalize recommendations on the Finance Supplementary Bill 2021, with Senator Talha Mahmood in the Chair here at the Parliament House.
Clause-wise reading on the Bill was taken under consideration. The committee members discussed each clause at length in the presence of the Chairman Federal Board of Revenue and put forward their recommendations. The committee rejected a number of tax impositions by majority vote and gave recommendations on a way forward in the interest of the common public.
The Minister for Finance also attended the meeting. The Minister for Finance maintained that the reforms are a central part to remove structural deficiencies. 16 trillion retail sales of the country are out of the tax net he added which needs to be streamlined.
The Minister while addressing the committee lauded the work of the committee members and assured his full support on the implementations of the recommendations of the Senate Committee. He also said that the consultation process between the Ministry and the Senate Committee should be strengthened, to empower the committee recommendations maintaining the integrity of the Upper House.
The Minister proposed quarterly meetings with the committee. The Minister said that the recommendations of the Upper House will be supported as arguments with the IMF. The Minister also stated that 8 members of the Board of the Directors (BOD’s) will be selected by the Finance Ministry and the Board of the Monetary Policy Committee (MPC) will also be determined by the Ministry of Finance. The Governor, State Bank of Pakistan is also elected by the government for a tenure of 5 years.
The Ministry maintained that a grant of 5 lakh rupees will be given to the local farmer 1.5 lakh per yielding field and a grant of 1.5 on the yielding mechanism. Sales tax on bicycles exceeding Rs. 25,000/- was also imposed.
The representatives of the Export Processing Zone put an appearance in the committee and pledged that the statement that the EPZ is out of net tax should be retracted. The EPZ also submitted a request for exemption of sales tax at the import stage in the EPZ’s.
The EPZ submitted that collecting sales tax upon importation stage in a free zone is not applicable anywhere in the world as it does not benefit the government in any way as 100 percent of input amount would be refunded, making it a tedious exercise with no benefit to the government, they argued. The EPZ further presented their arguments that the essence of a free zone and a bonded area concept would be eliminated and result in the closure of the industries which are contributing 1.5 percent on approximately $1 billion annually by surrendering foreign exchange, such inconsistency in policies will shatter the confidence of the foreign and local investor resulting in the closure of the concept of an Industry Free Zone in Pakistan.
The EPZ also submitted that the currency of the trade in the export Processing Zones is in US dollars, how will they pay and collect payment in Pakistani Rupees.
The All Pakistan Textile Mills Association submitted that the omission of the provision on CNIC which exempted the sellers from selling products to unregistered buyers in the market has been withdrawn in the new Finance Bill, shifting all obligations of verifications of Validity of the CNIC on the complaint and registered seller mills,
The All Pakistan Textile Mills Association submitted that the FBR also requires the seller to charge 3 percent additional tax, and once 3 percent additional tax is charged, there should be no further penalty. The APTMA submitted that it is the duty of the FBR to register the persons to whom sales are made rather than putting on the industry to act as sub-agents of FBR in the matter of documentation and collection of taxes.
The committee accepted the proposal of the APTMA and recommended that no penalty should be imposed on the seller and that a solution against the unregistered market must be devised. “Entrepreneurs are not a withholding tax agent’s stated senator Musadik Masood Malik while endorsing the argument of the APTMA. “Mini budget has disrupted the entire economy of the country”, stated the chairman committee while dismaying the new impositions.
The tax imposition on oilseeds means for sowing was also omitted by the committee. Senator Musadik Malik stated that it is imputative to agricultural production and innovations. “Tax exemptions have no connections to industrialization and agriculture maintained chairman FBR while debating on the proposition.
Tax imposition on Tillage and seedbed preparation equipment was also omitted by the majority vote. Cool chain machinery and equipment tax imposition was also omitted. Tax on plants for relocated industries was also unanimously omitted by the committee. The provision to allow disclosure of information in respect of High-level Public officials and public servants was also recommended by the committee to be revisited.
The meeting was attended by Senator Zeeshan Khanzada, Farooq Hamid Naek, Saleem Mandiviwalla, Sherry Rehman, Mohsin Aziz, Dilawar Khan, Faisal Sabzwari, Faisal Saleem Rehman, and Masadik Masood Malik. The Minister of Finance, the Chairman FBR, and Senior officials of the attached departments were also in attendance.
