Pakistan Business Council (PBC) has proposed to the budget makers to bring commercial importers into the normal tax regime in the upcoming budget (2012-13).

Sources told Business Recorder here on Wednesday that the PBC, representing largest private sector business groups including multinationals has submitted its budget proposals to the Ministry of Finance.

The commercial importers are charged a presumptive tax rate of 5 percent which is treated as their final tax liability.

This puts the corporate sector especially the listed corporate sector at a disadvantage.

It has been proposed that the commercial importers be brought into the normal tax regime.

Till it is accomplished, listed companies should be allowed the following: Firstly, the rate of withholding tax on import of finished goods/goods sold in the condition in which they are imported be 50 percent of that for the commercial/non-listed corporate importers.

Secondly, the listed corporate entities may be allowed the option to file returns under the normal tax regime.

Thirdly, in case they opt to file under the normal tax regime, the withholding tax deducted to be adjustable.

Fourthly, a listed corporate entity, opting to move from the presumptive to the normal tax regime for commercial imports, will not be able to revert to the presumptive regime for five years.
The taxation under the normal tax regime will lead to increased government revenues while at the same time help in increasing listings.

A bias in favour of the listed sector will lead to greater documentation of the economy, the Council added.
To check across the board massive under invoicing, dumping of imported products, it has been proposed that depending on industry input, values are fixed for import consignments; basis of valuation can be origin, weight, volume etc.

For items prone to under invoicing and misdeclaration, FBR designate one or two ports (including the dry ports) for clearing of import consignments.

This will allow better monitoring of the import consignments.

Institutional strengthening of the National Tariff Commission (NTC) is necessary in this regard.

This would allow industry to fairly compete with unscrupulous imports and government would benefit from increased revenue.
The PBC has further said that the governments of Pakistan and Afghanistan have signed a new Transit Trade Agreement in 2010.

The new agreement has done away with the provision of a negative list while at the same time most of the mechanisms' suggested for misuse of the transit trade including; quantity restrictions, collection of customs duties etc not been incorporated in the new agreement.

It has been proposed that Pakistan needs to take a more proactive approach in ensuring that the provisions in place for monitoring misuse of the new APTTA including the provision of submission of bank guarantees equivalent to GoP levies are collected on Afghan imports.

Additionally the Authority for monitoring the APTA needs to be notified at the earliest.

The rationale behind proposal is that making "smuggling" under the guise of "transit" less feasible will reduce pressure on domestic manufacturers while at the same time increase the government revenues.
Under existing section 65A of the Sales Tax Act, the tax credit to a person registered under the Sales Tax Act 1990: (1) Every manufacturer, registered under the Sales Tax Act 1990, shall be entitled to a tax credit of two and a half percent of tax payable from a tax year, if ninety percent of his sales are to the person who is registered under the aforesaid Act during the said tax year.
The proposed section under section 65A under the Act has been drafted by the Council.

Tax Credit to a person registered under the Sales Tax Act 1990: (1) Every manufacturer, registered under the Sales Tax Act 1990, shall be entitled to a tax credit of two and a half percent of tax payable from a tax year, if ninety percent of his sales purchases are to the from a person who is registered under the aforesaid Act during the said tax year.

This will encourage greater documentation as companies will have an incentive to purchase from registered persons.
The PBC has further informed that the values at which various custom check posts clear import consignments are not public information.

This allows unscrupulous importers to misdeclare consignments and evade government revenues.

The Sales Tax and FED deposited by various units is not public information.

This leads to massive evasion of Sales Tax and FED.
The Council has proposed that the values at which import shipments are cleared whether through Pakistan Revenue Automation Limited (Pral) or Care needs to be public information.

To protect confidentiality name of supplier maybe withheld.

Additionally, the old Customs General Order 25 needs to be revived with a provision that local manufacturers be given the option to buy at a 15 percent premium any consignments which appear undervalued.

It has been further proposed that the sales tax and Federal Excise Duty deposited by local manufacturers should be published as was the practice in the past.

It will result in greater transparency at import stage will lead to reduction in misdeclaration and evasion of duties.
It will also lead to greater accountability of the customs staff.

Will reduce the incidence of Sales Tax & FED evasion and increase government revenues.

If the KESC can publish the names of people stealing electricity, what is there to prevent the FBR from publishing the names of those who pay their taxes? PBC added.