Thursday September 16, 2021

PBC hails budget, advises changes in finance bill

June 19, 2021

KARACHI: Terming budget proposals as pro-inclusive growth, Pakistan Business Council (PBC) on Friday called for restoration of protection law against double taxation on dividends, removal of arrest power proposed for tax officials, and other changes in the finance bill for the next fiscal year.

PBC said clause 103C of Part 1 of the second schedule was removed just prior to the budget proposal, subjecting intercorporate dividends to double taxation, “thus discouraging investment.”

“The very rational protection against double taxation of intercorporate dividends, which is provided in many developing and developed countries and was available in Pakistan for nine out of the last 12 years, needs to be restored. This will encourage further group formation, which in turn will result in scale, wider shareholding and diversification of investment as well as the creation of jobs,” the business policy advocacy group in a statement.

An amendment needs to be made part iv of the second schedule to exempt intercorporate dividends from withholding tax.

The finance bill also proposed a new section to arrest and prosecute a person involved in concealment of income or any offense warranting prosecution under the income tax law. The power of arrest is proposed for an assistant commissioner of Inland Revenue or other officer of equal rank. The section should be deleted “as it runs a high risk of being misused to harass taxpayers, contrary to the stated intent of the government”.

“Instead the existing provisions in the tax law [must] be strengthened and exercised only upon determination, independent of the FBR [Federal Board of Revenue], of concealment of income,” said the PBC.

The PBC criticised the amendment introduced vide clause 96 (XXIX) related to tax medical benefits provided to salaried employees. Through this amendment the exemption available under clause 139 of part 1 of 2nd schedule to the Income Tax Ordinance, 2001 has been deleted. The exemption deals with the medical reimbursement and/or allowance including hospitalisation provided by an employer.

“The withdrawal of said clause will have a direct impact on the well-being of employees since the existing medical facility provide by the state is not sufficient in any manner and there is a heavy reliance on private medical facilities,” said the PBC. “Moreover, a serious medical emergency will sharply and unpredictably increase the tax burden of the salaried class with very limited means of meeting such liability.

While supporting the proposals to further enhance the scope of the term ‘smuggle’ by including ‘retailing’ of such goods in the scope of smuggle, the PBC said the section 2(s) should be expanded to apply to ‘counterfeit’ and ‘illicitly produced’ goods to help safeguard both the FBR’s revenue and health of the public.