Islamabad:
Pakistan said on Thursday that the International Monetary Fund (IMF) does not allow it to abolish the additional 4% VAT collected from unregistered persons and instead connected removal with a quarter increase in turnover tax base.
The supposedly punitive 4% extra tax is now a way to stay outside the taxi, as companies feel comfortable paying the extra tax and then recovering it through prices, rather than becoming part of the taxi.
The IMF rejected a proposal to abolish 4% VAT and asked to first register 50,000 more people in the turnover tax regime, Dr. Hamid Ateeq Sarwar, member of the Inland on income operations from the Federal Board of Revenue (FBR), during a meeting of the Senate Standing Committee for Financial Customs.
PPP Senator Saleem Mandviwalla was chairman of the meeting, which was called to address the concerns of business and recommend solutions. Mandviwalla supported the efforts to deter tax evasion and expand the tax base.
There are hardly 200,000 registered VAT, of which only 60,000 pay any taxes, said Sarwar, who reaches the super -decking age this week after having a wonderful career in FBR.
The government had introduced the extra tax to force people to enter the tax network, which is charged beyond the standard protection of 18%. However, companies transferred the extra tax to consumers and avoided the web.
There were heated discussions at the meeting between FBR and business leaders about the new punishing powers introduced in the budget. The military company has now intervened in the case after the traders observed strikes in Lahore and Karachi.
Special Investment Facilitation Council (SIFC) held a meeting this week to solve problems related to FBR’s arrest forces and add back over RS200,000 worth of cash expenses to the company’s income. After the intervention, FBR appeared in the mood to tackle genuine concerns from business.
Faisalabad Chamber of Commerce and Industry President Rehan Bharara questioned whether FBR used its previously punitive powers, including interruption of electricity and gas supply.
Out of 380,000 industrial connections and 5 million commercial relations, only 5% were in the name of the current Allottes, so they couldn’t be disconnected, Hamid Ateeq Sarwar said.
The low collection from retailers is still one of the worries, but FBR made a surprising claim for Prime Minister Shehbaz Sharif on Wednesday that it got a further RS455 billion from the retail sector in the last financial year. The claim requires independent verification as there is concern that some of the business sector companies are also included in the retail category.
FBR officials claimed that the total income tax payments made by the retail sector in the financial year 2024-25 were actually RS617 billion and the extra income tax was RS455 billion. They said the collection of RS617 billion included RS316 billion in quarterly progress given by three categories, wholesalers, retailers, dealers and some companies.
The surprising RS316 billion in quarterly progress could be examined with critical lenses due to the very informal nature of the sector. Sources in FBR told The Express Pakinomist that a loose definition of the retail sector was used, which included some business sector companies.
Representatives of the Karachi Chamber of Commerce and Industry (KCCI) once again raised the question of arrest powers and punished the use of cash over the RS200,000 value of purchases.
Senator Anusha Rahman of PML-N pointed out some loopholes in the recently approved tax law, which could be exploited by taxmen against business.
Prime Minister for Financing Bilal Azhar Kayani said the prime minister has instructed the harassment of taxpayers not to be tolerated at any price and the government is ready to intervene if any business people are injured by abuse of arrest powers.
Anusha Rahman said the newly approved law strengthens the arrest of taxpayers on “suspicion” and “reasons to believe.” She recommended that no persons should be arrested until FBR has proof of turnover tax fraud.
Hamid Ateeq Sarwar said the government could not change the law before the next budget, but these concerns would be dealt with through subordinate legislation by issuing an explanatory circular.
However, the PTI -senator Mohsin Aziz said that subordinate legislation could not replace the law.
Immediate changes in tax law would reflect poorly on the standing committees that discussed these changes, Parliament, which approved the laws and the government proposing them, noted Saleem Mandviwalla.
Sarwar came down hard on business leaders and said that in the last two years attempts were made to a huge RS2.2 trillion of VAT fraud and FBR -registered FIRs against these people. “If anyone is in doubt, we can arrange their meetings with these people in prison,” he said.
