Islamabad-Overseas Investors Chamber of Commerce and Industry (OICCI) has demanded the government to remove the super tax and no new taxes or surprises be announced in the upcoming budget, as it will further dampen the formal business sector.
OICCI presented its key taxation proposals for 2023-24 budget to Minister of Finance Muhammad Ishaq Dar. The meeting was attended by the Governor State Bank, top leadership of the Ministry of Finance and Revenue and FBR. Recognising the very high inflation impact on the low income group, OICCI has recommended that annual income upto Rs1.2 million be set tax free compared to the current Rs0.6 million annually.
OICCI President Amir Paracha appreciated the engagement by the government with leading tax contributor in the country and expressed the apprehension that “economy is currently under stress and GDP growth forecast including for large scale industries for the immediate near term is negative to marginally positive, which alongwith super high inflation and interest rates and fast weakening currency, has the potential to substantially dent the profitability of tax paying sectors next year”. “OICCI, therefore, has recommended that the super tax be removed and no new taxes or surprises be announced in the upcoming budget , as it will further dampen the formal business sector,” Paracha said.
OICCI stressed the urgency for broadening the tax base to boost its revenue collection according to the proportionate share of each sector of the economy, especially trade, services, real estate, and agriculture. OICCI stressed that sufficient data is available in the system to significantly broaden the tax base and arrest the revenue leakage due to the GOP. The finance minister appreciated OICCI offer of assistance and asked FBR team to work closely with technology companies, who are also members of OICCI, to help identify through latest technology tools, including Artificial Intelligence, in highlighting potential new taxable entities. OICCI has estimated that with dedicated efforts to collect revenue from all segments of the economy, the tax-to-GDP ratio can be increased in a few years to 16 percent, from current less than 10 percent. OICCI further recommended that a significant portion of current FBR resources, at least 30 percent, be assigned for BTB (Broadening of Tax) unit .
OICCI has also recommended the abolishment of super tax for all sectors and capping the corporate tax rate of 29 percent, and no further increase in effective tax rate which is already greater than the regional competitive rates. OICCI recommendation for elimination/reduction of minimum tax specially for listed companies and companies in the regulated sectors was also appreciated by the participants. The general rate for minimum tax should be reduced to 0.25 percent and carry forward of minimum tax credit be allowed for at least 5 years as prior to 2022. OICCI also recommended the simplification of withholding tax regime, with existing 200 different tax rates for 24 WHT sections, to make it more convenient and business friendly.
OICCI highlighted massive Excise duty evasion in tobacco industry (estimated to Rs80 billion), duty-not-paid goods, and under-invoicing, which adversely affects tax revenue. To ensure transparency, OICCI recommends the import data should be made publicly available. Custom valuation should be done by using latest method of valuation including, online search and matching international and regional pricing and taking local legal brand owners on board.