They have also raised eyebrows over making this exemption as part of law instead of considering the facility on case to case basis. It is in direct conflict and in defiance of the judgement by the Supreme Court whereby the prime minister is bound to seek approval of the Cabinet before announcing any remission of taxes.
Tax experts have also pointed out that there was no need of creating new directorates in the Federal Boar of Revenue (FBR), as the FBR yearly book 2015-16 reveals that more than 90 percent of taxes are collected through deduction at source.
Furthermore, they said what change could bring the new directorate of tax broadening if already 40 plus filed organisations have failed to produce desired results. Tax experts have also questioned the amendment made to the tax law that restraining order would be granted if the taxpayer deposits 25 percent of the impugned amount. Business community and their legal advisors generally complaint that the FBR prepares cases on flimsy grounds.
Furthermore, they said, the deposited 25 percent amount would remain in the custody of the FBR as in case of a reverse judgement the matter would be referred to the appellate court, followed by the superior judiciary. Is this a prudent way of nurturing a tax-compliant behaviour, they wondered. On the General Sales Tax VAT mode, they said, the tax is paid after taking input tax credit adjustment and the net tax payment on weighted average turn out should be three to four percent.
Strangely, the government has proposed 6 percent tax on the locally made fabric sold on the retail outlet. If the manufacturing is being taxed on weighted average of 3-4 percent, how a retailer can be forced to pay tax at 6 percent, wonders another tax expert.
This step would discourage people from innovating new brands to capture markets. Another mind boggling step, they said, is levying of 2 percent tax on the retailers dealing with assorted commodities. It may be noted that retailers have a very marginal profit as the main taxes are already paid by the manufacturers. The retailers have strangely been denied even the adjustment which they have already paid to the manufacturers. All such steps would keep the retail sector out of the tax net, they apprehended.
According to these circles, imposition of 2 percent extra tax on the seller selling to the unregistered buyer. It may be recalled that this tax was also introduced in the financial year 2016-17 but later on struck down by the superior judiciary on the ground that a seller cannot responsible for the legal obligations of the buyers.
The FBR has now amended the law and made seller responsible for the buyer as well in 2017-18 budget. This step would result into the emergence of fictitious buyers, as happened in 2003, who would obtain registration with zero business activity, they added.
They said the FBR has also not shared the data as to how much collection is likely to be made through further tax and how many would be brought into the net through this measure. On the point of stuck up sales tax refunds, they said section 10 of sales tax act provides for paying the sales tax within 45 days and ERS/STGO 2009 provides for making the payment in seven working days. But the finance minister very conveniently stated that refund payment order pertaining to financial year 2014-15, 2015-16 and 2016-17 will be issued in July and August, 2017. On the one hand, the finance minister hopes to achieve 12 percent export to GDP ratio while deferring payment of refunds on the other hand every now and then. How the exporters would even endeavour to achieve such a growth when refunds are not paid in time. They have termed the present budget a continuation of routine business, which discourages any innovative sophistication in the economy.
Copyright Business Recorder, 2017