KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the government to incentivise longer-term Foreign Direct Investment (FDI) and local investment to generate additional tax revenue and employment post COVID-19 environment, The News learnt on Monday.
In a letter to Dr Abdul Hafeez Shaikh, Adviser to Prime Minister on Finance and Revenue Federal, the OICCI recommended tax credit timelines on new investment to extend up to FY23 to incentivise investment plans in large longer-term projects for a positive impact on the economy.
The OICCI also urged the adviser to consider abolishing Alternative Corporate Tax (ACT) regime and restrict tax collection to no more than the actual tax liability.
“The members of OICCI, representing top 201 foreign investors in Pakistan, are closely following the initiatives being taken by the Ministry of Finance, to manage the tight fiscal space, which has become more challenging due to funds being allocated to address the COVID-19 issues. OICCI members fully appreciate that despite limited resources, the GOP has announced a number of concessions for the benefit of the vulnerable section of our society and for easing the pressure on small businesses,” President OICCI Shahzad Dada noted in the letter.
“We support your strategy to focus next year’s fiscal measures towards promoting ease of doing business; facilitating investment in manufacturing and employment generating services industry and simplifying the complicated tax regime in the country”. In its proposals for the upcoming federal budget, OICCI proposed to consolidate all federal taxes, income tax and levies into one single rate, making the system more efficient and business friendly. It may be mentioned here currently there are over 40 taxes being charged by various agencies.
The OICCI also recommended to reduce the general rate of minimum tax u/s 113 of ITO 2001 to 0.5 percent. The Chamber has proposed minimum tax rate (MTR) of 0.2 percent for oil marketing companies, refineries, LNG terminal operators, large chemical companies, authorized dealers of local vehicle manufacturers and traders, including large trading houses, dealing in sectors with high turnover and low margins.
OICCI suggested the withholding tax on import of raw materials and plant and machinery u/s 148 by industrial undertakings be substantially reduced from 5.5 percent to 2 percent.
“Withholding tax regime should be revamped by reducing it to a maximum of five rates only (against current over 50 rates) and the differentiation should be on basis of active and in-active taxpayers only,” it added
The overseas chamber also asked the government to rationalise sales tax rates – one rate and one tax return across the country and massively reduce physical interaction and discretionary powers of Federal Board of Revenue (FBR) field force, – maximum one audit in a year.
“The government should broaden the tax base through documentation- all income earners to file tax returns and arrest revenue leakages through fiscal and physical check in industries, sectors like duty not paid cigarettes, petroleum and other products smuggled under the cover of ‘Afghan Transit Trade’,” the OICCI said in its letter.