Islamabad:
Pakistan said Thursday that the International Monetary Fund (IMF) did not allow the additional sales tax of 4% that were collected from unregistered persons and, instead, linked the elimination with an increase in a quarter in the sales tax base.
The additional 4% tax supposedly punitive is now a way to remain outside the fiscal network, since companies feel comfortable when paying the additional tax and then recovering it through prices, instead of becoming part of the fiscal network.
The IMF rejected a proposal to abolish the sales tax of 4% and first requested to register 50,000 more people in the sales tax regime, said Dr. Hamid Ateeq Sarwar, a member of the internal income operations of the Federal Income Board (FBR), during a meeting of the Senate Finance Committee.
The PPP senator, Salem Mandviwalo, presided over the meeting, which was convened to address the concerns of the business community and recommend solutions. Mandviwalla supported efforts to discourage tax evasion and expand the tax base.
Only 200,000 taxes on registered sales, of which only 60,000 pay taxes, said Sarwar, who is reaching the retirement age this week after having a splendid race at the FBR.
The Government had introduced the additional tax to force people to enter the fiscal network, which is charged above the 18%standard sales tax. However, companies approved the additional consumer tax and avoided the network.
There were heated discussions at the meeting between the FBR and business leaders on the new punitive powers introduced into the budget. The military establishment has now intervened in the matter after the merchants observed strikes in Lahore and Karachi.
The Special Investment Facilitation Council (SIFC) held a meeting this week to solve problems related to the arrest powers of the FBR and adding more than 200,000 expenses of RS200,000 in cash to the income of the companies. After the intervention, the FBR seemed to be in humor to address genuine concerns of the business community.
The president of the Chamber of Commerce and the Faisalabad industry, Rehan Bharara, questioned whether the FBR used its previous punitive powers, including the disconnection of the electricity and gas supply.
Of 380,000 industrial connections and 5 million commercial connections, only 5% were on behalf of the current assigned, therefore, they could not disconnect, said Hamid Ateeq Sarwar.
The low collection of retailers is still one of the concerns, but the FBR on Wednesday made a surprising claim against Prime Minister Shehbaz Sharif that obtained an additional 455 billion of the retail sector in the last fiscal year. The claim requires an independent verification, since there is concern that some of the corporate sector companies are also included in the retail category.
FBR officials stated that the total payments of the Income Tax made by the retail sector in fiscal year 2024-25 were in fact RS617 billion and the additional income tax was 455 billion of 455 billion. They said that the RS617 billion collection included RS316 billion in quarterly advances granted by three categories, wholesalers, retailers, merchants and some companies.
The surprising RS316 billion in quarterly advances could be analyzed with critical lenses due to the highly informal nature of the sector. The FBR sources told The Express PAkGazette that a loose definition of the retail sector was used, which included some companies in the corporate sector.
The representatives of the Karachi Chamber of Commerce and Industry (KCCI) once again raised the issue of arrest powers and penalize the use of cash above RS200,000 in purchases.
Senator Anusha Rahman, of the PML-N, said some lagoons in recently approved tax laws, which could be exploited by taxes against the business community.
The Minister of State for Finance, Bilal Azhar Kayani, said that the prime minister has ordered that taxpayers harassment will not be tolerated at any cost and that the government is ready to take measures if any entrepreneur hurts for the misuse of arrest powers.
Anusha Rahman said that the recently approved law allows taxpayers arrest for “suspicion” and “reasons to believe.” She recommended that no person be arrested until the FBR has evidence of sales tax fraud.
Hamid Ateeq Sarwar said the government could not amend the law before the next budget, but that these concerns would be addressed through subordinate legislation by issuing an explanatory circular.
However, PTI senator Mohsin Aziz said subordinate legislation could not replace the law.
The amendments immediately to the tax laws would be badly reflected in the permanent committees that debated these amendments, the Parliament that approved the laws and the government that proposed them, said Salem Mandviwalla.
Sarwar fell strongly with the business leaders, saying that in the last two years attempts were made for a huge tax fraud of sales of RS2.2 billion and the FBR registered Fir against those people. “If someone has doubts, we can organize their meetings with these people in jail,” he said.
