Federal Minister for Finance and Revenue, Mr. Shaukat Tarin, accompanied by SAPM on Finance and Revenue Dr. Waqar Masood Khan, Chairman FBR Mr. Asim Ahmad, visited OICCI on August 20, 2021, for a joint meeting with senior executives of Overseas Investors Chamber of Commerce and Industry (OICCI) and Pakistan Business Council (PBC) member companies. OICCI President Irfan Siddiqui, PBC President Saquib Shirazi and OICCI Secretary General M. Abdul Aleem welcomed the honorable guests, as well as members of the two chambers. The OICCI President appreciated and praised the efforts of the finance minister and his team for incorporating various OICCI proposals in the 2021-2022 budget and introducing several ‘ease of doing business’ measures.

The finance minister mentioned that he is aware of the concerns of OICCI members related to Minimum tax on turnover, Inter- Corporate Dividends and lack of coordination between the FBR and provincial taxation authorities on WWF/WPPF related matters. He assured the participants that all their concerns will be duly reviewed and addressed. In this respect he expressed his appreciation of the efforts of OICCI and PBC during the FY 2021-22 Budget making process

The FM informed the participants that after 1972 planning had not been effective in Pakistan and had lacked the necessary focus. He shared that the Economic Advisory Council of the government has now developed short and long-term plans for 14 key areas and the Prime Minister will be briefed on the progress made on the plans in regular monthly meetings. He further added that a cell will be included in Finance Ministry to coordinate in this respect, which shall also seek necessary support from PIDE (Pakistan Institute of Developmental Economics).

The Minister mentioned that government is trying to broaden the tax base with the help of information technology and the authorities now have the capability to estimate with 80% accuracy the income level of individuals, based on data available with FBR, NADRA and other sources. He further added that a mechanism for self-assessment and third-party audits, by professionals of independent bodies like the Institute of Chartered Accountants of Pakistan, will be introduced to address complaints relating to tax harassment.

Mr. Tarin apprised that a new mechanism would also be introduced to ensure proper tax collection from the retail sector under which prizes would be given to consumers for ensuring that they collected valid receipts from retailers. He said that new programs would be introduced to support foreign remittances and utilize the export potential of IT sector.

The Minister acknowledged that there had been a rise in inflation, particularly food inflation, which is soaring due to international prices, as Pakistan is now a net importer of food items.  He assured the participants that various measures were being taken to address the problems in the agriculture sector, as well as to address poverty and support the lower income segment of the population, for which the government will soon be rolling out Kamyab Pakistan program, which will be the next step after the Ehsaas program.

On a point raised by a participant that the media has reported anxiety expressed by some economic experts about the fast-increasing imports with the import bill going up to US$ 70-80 billion per annum without counter increase in exports resulting in current account deficit going up further, with consequential deterioration in value of PKR and other negative fallout, the Minister responded that this is a matter which is in the focus of the government but assured the situation is not as alarming as being reported.

In the Q & A session, participants requested the FM to address some hardship issues, which included the following points:

• As Pharma business is exempt from sales tax but not zero rated, the input tax has become part of costs for the pharmaceutical industry. As pharmaceutical prices are regulated input sales tax cannot even be passed on to customers. Therefore it should be zero rated.
• More than 90% of medical devices are imported. Duties and taxes are at the level of luxury goods, which needs downward revision as it is borne by patients. Further, sales tax input on medical devices supplied to governmental hospital cannot be recovered (government hospitals being sales tax exempt).
• Recovery of old tax refunds
• Controls to prohibit counterfeits and grey channel product supply
• Enforcement of Intellectual Property Rights (IPR)
• Weaknesses in Anti-Dumping Act and custom valuations.

The Minister assured that all the issues raised will be reviewed and appropriately addressed, if required. He also assured regular interaction with business chambers to track progress on resolution of their issues.

Earlier before the finance minister joined the participants for the session, M. Abdul Aleem shared a summary of the OICCI Business Confidence Survey, Wave 20 results, which are yet to be released and the following key taxation and Companies Act 2017 related concerns of OICCI members and requested for his support to address these issues.

FBR related points:

Minimum Tax on Turnover

Reduce Minimum tax rate (MTR) for regulated Oil marketing and other high turnover, low margin chemical companies to 0.5% in line with the rate for oil refineries.

Inter- Corporate Dividends be exempted

Re-instate Clause 103C of Part I of Second Schedule of ITO, and amendment be made in Part IV of Second Schedule to provide exemption from withholding tax on intercorporate dividends exempt under clause 103C of Part I of Second Schedule of ITO to encourage formation of large groups to initiate major projects in the country.

New ruling by FBR that WWF/WPPF liability cannot be adjusted against tax refunds

LTU Karachi has issued notices to taxpayers it intends to rectify the adjustment of WWF liabilities made in the tax return against taxes paid/deducted during last six tax years as per Secretary (ST-L&P) letter dated May 25, 2021.

Sovereign Guarantee needed for big Power Generation projects

Is the Government of Pakistan willing to give Sovereign Guarantee for big Power Generation projects?

Integration of point-of-sale (POS) with the Federal Board of Revenue (FBR) for real-time reporting of sales 

Update requested on this important tax broadening measure. Media reports mention only about 12000 retail outlets have been integrated and a list has been published of 6,763 tier-1 retailers all over the country who are not yet integrated. These numbers seem to be just a fraction of the real number of tier-1 retailers

SECP related points:

The Companies (Amendment) Ordinance, 2020 promulgated in April, 2021 and The Companies (Second Amendment) Ordinance 2020 in July, 2021

Both the above Ordinances have lapsed. Some of the concerns raised by OICCI members (like deposit of unpaid dividend, in government treasury, etc) were addressed in these ordinances. What is the way forward?

Section 452 (Global register of beneficial ownership)

We request for an urgent review of the whole issue once again in the light of international best practices and economic conditions in Pakistan where we should be taking measures to facilitate and not deter investors. As recommended during the 2018 consultation process, Section 452 be deleted entirely from the Companies Act 2017.

Attendance in AGM through video link

SECP had put on hold the circular of February 15, 2021 and allowed attendance in AGMs through video link. In view of the fact that the pandemic is continuing attendance in AGM vide video link may be made a permanent feature