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News Clips 29 January, 2016

[ Pakistan, China to implement electronic data exchange system ]
[ Cotton import from India: PCGA opposes withdrawal of RD, tax ]
[ Income tax, sales tax and FED: FBR proposes procedure for selection of cases for audit ]
[ FPCCI backs govt’s privatisation policy ]

Pakistan, China to implement electronic data exchange system   [ top ]

Business Recorder, January 29, 2016
Pakistan and China would soon implement an electronic data exchange system to verify Certificates of Origin of Chinese goods being imported into the country, eliminating changes of frauds. Federal Board of Revenue (FBR) Chairman Nisar Muhammad Khan told the Senate Standing Committee on Finance here on Thursday that the FBR was making serious efforts so that the Certificates of Origin (Chinese items) should reach Pakistan electronically. There are chances of fraud in submission of manual certificates by importers. 

After hectic negotiations between Pakistan and China, both the sides agreed to exchange Certificates of Origin of Chinese/Pakistani items through electronic system. The FBR has developed its system which would soon be connected with the Chinese customs to verify the said certificates. Besides, verification of Certificates of Origin, the electronic system would also verify the value and description of imported goods under Free Trade Agreement between Pakistan and China. This would resolve the issue of accurate value and description of imported goods. To a question, he added that the over 50 percent of the imports from China are under FTA. 

Cotton import from India: PCGA opposes withdrawal of RD, tax   [ top ]

Business Recorder, January 29, 2016
Pakistan Cotton Ginners Association (PCGA) has opposed any proposal regarding waiving off the duty and tax on the import of cotton from India and also demanded that regulatory duty, sales tax and customs duty on the import of cotton should not be withdrawn and it must continue for the survival of local farmers as well as ginners. 

The association Chairman Nawab Shehzad Ali Khan said that Cotton economy was passing through the worst crisis of the history and we should avoid to benefit any stake holder at the cost of national economy and Prime Minister Nawaz Sharif should take notice of such proposals personally. 

He warned," if the tax and duty was waived on the import of cotton from India then it would be detrimental to local growers and ginners whose 1.5 million bales are lying in unsold stock besides deprivation the government of millions of rupees of taxes. However it would be in the benefit of Indian farmers, ginners and importers. Shehzad Ali Khan suggested that Government should wait till the disposal even a single bale of cotton lying in ginneries or standing in field. 

He said that India has been a major beneficiary of duty-free import of cotton yarn by Pakistan for about four years, which has badly hit the domestic industry and agricultural sector of the country under a well planned conspiracy. He said that there would be a huge loss of cash crop if the farmers adopted other crops. He said that the exemption from customs duty, regularly duty and sales tax may hit the domestic industry hard as it drove down demand for local cotton and pushed lower prices paid to farmers. The increase in imports mainly came from India that was providing huge subsidies in the form of duty drawback, interest rate concessions and infrastructure schemes for its cotton industry. 

Income tax, sales tax and FED: FBR proposes procedure for selection of cases for audit   [ top ]

Business Recorder, January 29, 2016
The Federal Board of Revenue (FBR) has proposed a detailed procedure for selection of income tax, sales tax and Federal Excise Duty cases for audit through a computer ballot on random and parametric selection basis. In this regard, the FBR has issued three notifications here Thursday. According to the SRO 55(1)/2016, the rule shall apply to selection of cases for audit by the FBR under section 42B of the Federal Excise Act, 2005. 

The following steps shall be followed for selection of cases for audit through a computer ballot on random and parametric selection basis for tax periods mentioned therein: Firstly, the data of all returns (e-filed and manually filed) shall be utilised as a basic data. Secondly, the Board shall decide the cases of persons or classes of persons which are to be excluded from audit selection and such exclusions shall be publicised each year through FBR''s web-portal for information, prior to the process of balloting or selection. Thirdly, the cases falling under exclusions shall be identified and such cases shall be excluded from the data to be used for balloting. Fourthly, the data of the remaining cases shall be utilised for computer ballot for audit selection. Fifthly, for each tax period cases for audit shall be selected in accordance with the predetermined percentage, to be publicised through FBR''s web portal, and prior to the- balloting process, each year. Sixthly, immediately after computer ballot, the lists of selected case shall be generated and placed on FBR''s web-portal. Seventhly, the whole balloting system for audit selection shall be based only on the NTNs/CNICs of the filers. Eight, the NTNs and CNICs of the cases selected for audit shall be communicated to concerned RTOs and LTUs as per their respective jurisdictions. Ninthly, for the purpose of selection of cases on parametric basis, risk parameters for persons or classes of persons to be used for balloting, wherever necessary, shall be determined by the Board. Tenth, risk parameters for persons or classes of persons to be used for balloting shall be determined by the Board. 

It said that the audit selection parameters may be based upon the financial ratios for the year viz a viz the history of the case; financial ratios viz-a-viz industrial, sectoral or national ratios; industrial comparisons or bench marks; quantum of losses or refunds beyond certain thresholds; compliance history and computer balloting process in both categories of selection for audit shall be held in the presence of representatives from Chambers of Commerce and industries and representatives of Tax Bar Associations. 

The cases selected for audit by the Board shall be processed as per laid down procedure. The Commissioner Inland Revenue concerned shall issue intimation letter to the taxpayer about the selection of his case for audit with the details like section under which selection has been made; tax period for which the case has been selected for audit; mode of selection whether random or parametric; compliance requirements on the part of taxpayer eg provision of prescribed books of accounts; supporting information and documents etc; and computerised data access to computerised data or provision of attested hard copies of computerised data. 

On completion of examination of books of accounts, data or information under this rule the discrepancies, if found, shall be intimated to the taxpayer for obtaining taxpayers'' explanation, in the form of audit report seeking taxpayer''s explanation on these points. 

Explanations of the taxpayer, where found not acceptable, shall be intimated to the taxpayer, through a notice under section 46(2A) of the Federal Excise Act, 2005 about the assessment of duty along with the rationale or basis of such amendment and necessary tax assessment order shall be passed under section 46 of the said Act after affording adequate opportunity of bearing to the taxpayer, it added. 

Through SRO 52(1)/2016, the FBR has also proposed amendments in the Income Tax Rules, 2002. The rule shall apply to selection of cases for audit by the FBR under section 214C of the Income Tax Ordinance, 2001. Under SRO 54(1)/2016, the FBR has proposed amendments shall be made in the Sales Tax Rules, 2006. This rule shall apply to selection of cases for audit by the FBR under section 728 of the Sales Tax Act, 1990. 

FPCCI backs govt’s privatisation policy   [ top ]

Daily Dawn, January 29, 2016
KARACHI: The Fed­era­tion of Pakistan Chambers of Commerce and Industry (FPCCI) on Thursday exten­ded full support to government’s privatisation policy on state-owned enterprises.

The decision to this effect was taken at Lahore in FPCCI’s second executive committee meeting chaired by its president Abdul Rauf Alam. Members from across the country participated via videoconferencing.

Members opposed the recently announced tax amnesty scheme on the ground that it was contrary to the interest of the economy as well as to taxpayers. They suggested the government should re-visit the amnesty scheme before presenting it in the National Assembly.

On the occasion, a committee was set up to provide input to the government on the China-Pakistan Econo­mic Corridor (CPEC). The committee will be led by FPCCI president.

The meeting was critical of the government’s policy of not fully transferring the benefits of reduced crude oil prices in the world market to the business community and masses.

The issue of electricity tariff also came up. The members strongly reacted to the fact that despite Prime Minister Mian Nawaz Sharif’s announcing a cut in power tariff by Rs3 per unit for industrial consumers, the decision was not implemented.

The FPCCI president formed a committee to look into suggestions from member trade bodies for the forthcoming budget (2016-17) for onward submission to the government. Feb 10, 2016 is the last date for receiving suggestions from FPCCI member bodies.

The member bodies demanded that the government should immediately adopt a policy of ‘no-tax and no-refund’ for export sectors and pace of payment of refunds should be increased so that further accumulation of outstanding payments towards drawback, customs duty, sales tax and local levies could be stopped.

The FPCCI committee members took serious note of the threatening notices being issued by Sindh Board of Revenue (SBR) about levying sales tax on exportable services. They opined that such tax was not imposed anywhere in the world and suggested for taking up the matter with the SBR.