October 08, 2020: The Karachi Chamber of Commerce & Industry (KCCI) has drawn the attention of Dr. Abdul Hafeez Shaikh, Advisor to Prime Minister for Finance to the SRO.889(I)/2020 dated 21.09.2020 issued by FBR, whereby amendments have been made in Sales Tax Rules 2006 which in fact is the proverbial last straw on camel’s back.
A new Chapter XIV-BA has been added which seeks to install digital monitoring equipment and video cameras with sensors in many industries to monitor their production.
Commenting on the said SRO, President KCCI M. Shariq Vohra said that such measures will only lead to deindustrialization because the industrialists are already fed up with many issues and problems associated with running the industry.
He pointed out that the industries are already over-burdened with the high cost of electricity, load-shedding of gas and electricity, a crumbling infrastructure, lack of water supply, high rates of Sales Tax, VAT, FED and WHT, Customs duties on raw materials, additional customs duty and regularity duty besides a plethora of local and provincial taxes. More regulations and stifling rules will further discourage fresh investment in industry, he added.
Shariq Vohra further emphasized that Industry in Pakistan is still in a growing phase and not yet ready to comply with such rules and deal with the discrepancies raised by officers assigned to monitor production. Such rules will inevitably result in harassment and corruption. “It will be particularly difficult for the SMEs to comply with new rules in addition to the existing complex tax regime, resource constraints and lingering effects of Covid-19 on all businesses.
He feared that amendments in tax laws through Finance Bill’2020 and a very large number of notifications, and SROs amending Rules and Procedures issued by FBR will further squeeze the tax-payers who are already burdened with a complex and coercive tax regime. Against the advice of tax professionals and proposals of trade bodies, the bureaucracy continues to make compliance more and more difficult and creates deterrents to the broadening of the tax base.
President Vohra added that despite acquiring unchecked discretionary powers, the tax offices and field formations of FBR have failed to achieve any significant increase in the number of taxpayers, other than those who are forced to pay mandatory With-Holding Taxes on various transactions. Hence a nominal increase in the number of registered persons is not a result of efforts by RTOs or field officers.
He mentioned that earlier, by insertion of new provisions 56A/56B in the Income Tax Ordinance, FBR has acquired unprecedented and unrestricted access to the personal data and occupational activities of all citizens of Pakistan, yet the officers of Inland Revenue do not seem to have confidence in their own ability to bring new taxpayers in the tax net and rely more and more on squeezing the trade and industry which is already contributing a major share to the national exchequer. “Because of the coercive nature of the regulatory regime, the number of taxpayers has shrunk from 2.8 million to 2.4 million. If this continues, the government will fail miserably in its efforts to improve the economy.”
This indeed is a failure on the part of an institution which has been tried and tested for decades and it is high time that government should do away with existing tax administration and adopt a more effective and efficient model for tax collection and revenue generation which is non-interventionist, business-friendly and remove trust deficit between taxpayer and tax collector to facilitate compliance, he added.
He further commented that on one hand, the government has given a generous amnesty to the construction and real estate sector but on the other hand, exact opposite policy is being followed which will stifle all other industries that badly need liberalization and ease of doing business to overcome the losses suffered in the year 2020 due to Covid-19 and global economic slowdown.
Therefore, President KCCI appealed the Advisor to Prime Minister for Finance and Economic Affairs to intervene and issue directives to the FBR to withdraw such draconian rules promulgated through SRO.889(I)2020 and rescind the impugned SRO which is counter-productive to industrialization and economic growth. He further suggested reviewing all existing provisions and discretionary powers vested in officers of Inland Revenue which are misused to harass tax-payers and only serve as a deterrent to broadening of the tax base.