OICCI submits growth-oriented tax proposals ahead of 2017-18 budget

KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI), representing the collective recommendations of foreign investors, recently submitted comprehensive "taxation proposals" for the upcoming federal budget for 2017-2018.

The proposals are focused on accelerating economic growth and inflow of foreign direct investment (FDI) in the country. The institution had earlier submitted the key taxation proposals on February 9, 2017, to the Federal Board of Revenue (FBR).

Commenting on the recent development, OICCI President Khalid Mansoor said, "OICCI’s comprehensive proposals are balanced and aim at providing a level playing field to investors, enhance the documentation of the economy, besides recommending certain structural and procedural changes to improve the overall taxation framework in the country.”

The taxation proposals recommend that the government factor in the tax policies, which lead to longer-term investment plans, with suitable protection to ensure at least a 10-year-long phasing-out period so that local and foreign investors can base their plans on policies that are predictable and consistent over a reasonable time.

OICCI further recommended that the targets given by the FBR hierarchy to the large taxpayer units (LTUs) should be realistic on research-based growth projections in different business sectors.

Similarly, growth in tax collections, over and above the projected economic growth, should be fully quantified by estimating the contribution from broadening the tax base and bringing in new taxpayers to the tax net. For this purpose, OICCI recommends forming of a research and analysis wing at the FBR, resourced with high-caliber professionals and experts to provide sector-based economic and taxation projections.

Mansoor added, “OICCI has also recommended that the tax reform commission 2016 report be judicially and transparently implemented with periodical monitoring of overall impact on improved tax administration, taxpayers' morale and motivation, besides substantially increasing the number of tax filers, revenue collection, and tax-to-GDP ratio”.

OICCI's specific recommendations comprise reduction of the corporate and general sales tax rates from 30 to 25% and from 17% to 13%, respectively – in line with the rates in the Asian region – alongside with abolishment of the 3-4% super tax. They also include Rationalise Minimum Tax (MTR) regime for large-value, low-margin businesses, such as oil marketing companies.

Additional recommendations are:

• Revamping and massive simplification of Withholding Tax Regime from 55 rates at present to only 5
• Incentives for new investments in manufacturing and employment generating ventures to be made part of every budget
• Group taxation relief to be re-introduced
• Workers Welfare Fund (WWF) and Workers Profit Participation Fund (WPPF) jurisdiction and tax deductibility be clarified, especially after the promulgation of similar legislations in the provinces
• Coordination between federal and provincial legislations should be improved as foreign investors have invested in Pakistan and not in any particular province and therefore, should not suffer from inter-governmental issues
• Pending income/sales tax refunds be settled within a month

The OICCI has also submitted specific taxation proposals for various business sectors, including Automobiles, Financial services, Chemicals/Pesticides/Fertilizers, Engineering/Electrical, FMCG, Dairy, Oil/Gas/Energy, Pharmaceuticals, Telecommunication, and Tobacco.