TAX NEWS APRIL 29, 2016

1.      Budget 2016-17: Corporate tax to be reduced by one percent

April 29, 2016

Corporate tax is going to be reduced by one percent in budget 2016-17, a top FBR official said here on Thursday. Speaking at a pre-budget seminar organised by the Karachi Tax Bar Association (KTBA) held at RTO auditorium, Rehmatullah Wazir, Member Inland Revenue (IR) Policy said the government has decided to reduce corporate tax, which is presently roaming around 33 percent, to 30 percent till 2018 and added that the rate of corporate tax would be reduced by one per cent every year till 2018 to fix it at 30 percent. 

He said tax to GDP ratio, which was presently 11 percent, would be escalated to 12 percent by the end of June 30, 2012 with the efforts of federal and provincial tax authorities. Moreover, Rehmatullah Wazir said that there was no plan to reduce sales tax rate in coming budget and Super Tax, which generated revenue up to Rs 15 billion for Internally Displaced Persons (IDPs), would be continued in next fiscal year. 

He said the government was also planning to squeeze the noose around the persons involved in under and over invoicing and the legal framework was being evolved for the purpose. 

Earlier, Haider Ali Patel and Mazhar Ali Shah gave electronic presentation in the pre budget seminar. Haider Ali in his presentation said that Pakistan has experimented many ways to develop a tax culture but with least concern to actual stake holders and added that reliance on specific schemes for broadening of tax base instead of focused fieldwork by the field formations for broadening coupled with behaviour of masses of not discharging their obligation to the state has resulted in a very low level of tax compliance in the country. 

He said that enhancing collection of direct tax in indirect mode through FTR and MTR were the measures aiming towards improving collection of revenue alone instead of inculcating the culture of disclosure of real income and assets in the society. Moreover he said that frequent changes in the tax laws, Super tax, tax on undistributed reserves, alternative corporate tax etc would lead reduction in tax collection in the long run as investment plans would be reviewed by corporate sector. 

He said that the Budget 2016-17 gave the government another opportunity to address the structural weaknesses of the economy and to introduce effective policies to increase documentation of the economy to widen the tax base. He said that taxpayers in practicality were not able to obtain any financial benefit by opting out of the FTR and were instead required to face additional burdens and risks of tax audit by filing returns of income. He also proposed that FTR be converted into minimum tax with the facility to carry forward excess minimum tax paid for corporate taxpayers. 

Patel further suggested that the maximum volume restriction be at least enhanced to 150 percent and the requirement to meet the tax payment equal to previous two tax years be abolished. Meanwhile, Shah in his presentation stated that standard rate of 17 percent on imports and local supplies was quite high and on commercial imports it was 20 percent - (17 percent plus 3 percent) 

He said that high rate in narrow tax base - stimulator to tax evasions, under-invoicing and smuggling. Therefore, it had been suggested to reduce sales tax rate to 10 percent standard along with 3 percent value addition rate on luxurious/high margin goods. He said that the restriction to adjust input tax for the month against output tax excluding levy of ''further tax'', ie, 2 percent should be withdrawn to lessen unrest among taxpayers, particularly where excess input tax arises in the sales tax returns. He further recommended providing immunity from extra tax on sale of specified goods to manufacturers or industrial sectors and added that cumbersome refund mechanisms and red tapism needed to be eschewed in order to facilitate taxpayers.

2.      Consignment of smuggled goods seized

April 29, 2016

A successful anti-smuggling operation of Model Customs Collectorate Islamabad Thursday resulted in a major seizure of consignment of smuggled cloth and fabric to the tune of millions. It is learnt that the Anti Smuggling Cell of Islamabad Model Customs Collectorate has intensified efforts against smugglers. 

In continuation of the ongoing Anti Smuggling campaign, initiated on Special Directives of FBR, the Collectorate of Customs Islamabad's anti smuggling squad this morning (28.04.2016) seized Toyota hiace van coming from Peshawar to Islamabad, full of smuggled cloth and Fabric belonging to notorious smuggler Toora Khan. Value of seized goods and vehicle is million of Rupees. FIR lodged against the culprits. Further investigations are in progress. Collector Customs Islamabad has appreciated the outstanding performance of his Anti Smuggling Team and has announced Special Rewards for the Anti Smuggling Staff and has written to FBR for release of special grant for this purpose. 

3.      Contraband drugs worth Rs 5.5 million seized; one held

April 29, 2016

Pakistan Customs Preventive on Thursday claimed to have arrested a passenger and recovered 550 grams amphetamine worth Rs 5.5 million from his possession. According to official details, the Customs staff posted at JIAP international departure while keeping surveillance on outgoing passengers abroad spotted a Pakistani passenger namely Raees Khan who had to depart Saudi Arabia via Dubai airline. During examination of his luggage, the staff has recovered 550 grams amphetamine worth Rs 5.5 million which were cleverly concealed in his suitcase. Consequent upon recovery, the case has been registered. Further investigation is in process. 

4.      Tareen rejects tax fraud allegations

April 29, 2016

With an open challenge to Prime Minister Nawaz Sharif to make his tax details public within seven days, Pakistan Tehreek-e-Insaf leader Jehangir Khan Tareen on Thursday rejected off tax fraud allegations, saying all his tax details are available for any counter-check. Speaking at a press conference with all the details of tax details, he took the Prime Minister head on and said: "I want to ask the Prime Minister to apprise us about his assets through which his children made offshore accounts". 

"If this was a hard earned, Mr Prime Minister, I just want to ask how much tax you paid? How this money [in offshore accounts], was sent abroad. My request to you is that make the details public within seven days or else people will be forced to believe that there was something fishy," he added. Tareen severely criticised the government for what he said his character assassination. The government should have proceeded against him if it was sure that he committed tax fraud, he said, adding "it is nothing but a pressure tactic after the Panama leaks, the ruling junta has been badly exposed." Fake documents are being prepared at a media cell set up in the Prime Minister''s House and propaganda is being spread against political rivals, he said, adding public money is used in campaigns against political opponents. 

"We will take action against this factory of lies at PM House," he said and added that PTI will move court after consultation with legal experts. "PML-N is blackmailing and I will fight against Nawaz Sharif," he added. 

PTI leader said that opposition parties will chalk out Terms of References (ToRs) for judicial commission over the Panama leaks. He hoped the Chief Justice will not accept ToRs delineated by the government. He asked the Prime Minister to tell the nation from where he had received money for London flats, adding if government wants a counter-check of his tax details, they can go for it. "All asset details are available on PTI as well as Election Commission of Pakistan (ECP) websites," he maintained. 

He claimed he had paid Rs 27 crore tax for the sugar mills he owned, which is the highest compared to any other sugar mills owned by the Sharifs, adding the sole purpose of this propaganda drive against him is nothing but to divert people''s attention from the Panama scandal. 

5.      Contempt plea: notices issued to SBP, FBR officials

April 29, 2016

The Supreme Court on Thursday issued notices to four officials of State Bank of Pakistan (SBP) and Federal Board of Revenue (FBR) for indictment in response to a contempt plea over the violations of the apex court directives in money laundering of US $1, 01100 and 2600 Japanese Yen. A two-member bench of Justice Ejaz Afzal Khan and Justice Sardar Tariq Masood resumed the hearing of a contempt plea of collector of customs Rawalpindi against Khude-e-Noor and others in the matter. 

During the course of hearing, Sohail Mehmood, Deputy Attorney General for Pakistan, informed the bench that the Supreme Court had announced its verdict in an appeal of Khude-e-Noor against the collectorate of customs Rawalpindi in 2006 under SBP clarification letter No EPD/863/24/LISC/.C/04 of February 7, 2005. Mehmood submitted that according to the letter, taking currency abroad inside the baggage was banned strictly. 

The court was apprised that customs officials in Islamabad airport apprehended a person Allah Bash for attempting to smuggle out the said amount of foreign currency. Federal Investigation Agency registered an FIR No 4/2006 against Allah Bash who was latter awarded imprisonment of five years but the forfeited amount was released in consequence of the then Prime Minister Syed Yousuf Raza Gilani's aid. Allah Bash is said to have met Gilani during the latter's confinement period. 

The petitioner's counsel pleaded that Joint Director of the SBP Aftab Iqbal Siddiqui issued a No Objection Certificate to release the said amount, violating the apex court earlier' verdict in the matter. Additional Collector Customs Abur Razaq regularised the said currency-issuing directives to release the currency making the NOC as justification; however, he issued the currency release order for Allah Bash, subject to condition of obtaining NOC from the Special Customs Court Rawalpindi where the accused's trial was under adjudication. Later, the Customs Court Rawalpindi awarded five years imprisonment to Allah Bash with a fine of five lack rupees but Dr Sadiq ullah Khan, the second Secretary of the FBR, waived the condition of the NOC from the Special Court, consequently the substantial amount of the currency was released. 

Assistant Collector Customs Khude-e-Noor's counsel told the bench that the then Prime Minister Syed Yosuf Raza Gillani and the then Chairman FBR directed to issue currency. 

Expressing dismay over the violation of rules and regulations to favour Allah Bash by the concerned authorities, Justice Ejaz Afzal Khan asked under which rule he was allowed to transfer such amount abroad. 

The bench issued notices to the SBP' Director Samer Hussain and Joint Director Aftab Iqbal Siddiqui, FBR's second secretary Dr Sadiqullah Khan and Assistant Collector Khude-e-Noor to appear before the court. The bench plainly said that the court has issued notices to all the four officials for indictment in the matter. The hearing of matter was adjourned for an indefinite period.