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Taxes higher in Punjab than other provinces

LAHORE: The Overseas Investors Chamber of Commerce and Industry (OICCI) has expressed its disappointment over Punjab government’s recent budget announcement, saying its members have concerns over tax provisions in the Finance Bill 2017-18, which may not allow investors and business community a level playing field compared with other provinces.

This year’s budget likely to see modest taxation measures

In a letter sent to Finance Minister Dr Ayesha Ghaus Pasha, the OICCI – largest chamber in the country with 195 companies onboard that pays around Rs900 billion in tax revenues annually – praised many of the budget measures, especially the significant allocation for developing the industrial sector, including small and medium enterprises, social welfare programmes, increase in the minimum wage and others.

However, OICCI members were disappointed with repeated failure of the provincial government to reduce the 16% sales tax, which was considerably higher than the 13% tax in Sindh for the past two years.

“Punjab has again decided not to align its taxation structure with other provinces and facilitate the level playing field for taxpayers across the country,” the OICCI said.

The investor body pointed out that its members, after a review of the Punjab Finance Bill FY18, had noted a few areas of concern, which had the potential to spoil the provincial government’s efforts to attract investment from both existing and new foreign investors.

The sales tax on construction-related services was reduced to 5% from the current rate of 16%, but without adjustment of input tax. “This will substantially increase the cost of doing business for a number of our members who have already initiated large investment projects and plans to invest in more projects.”

In the finance bill, the time frame for the initiation of proceedings against taxpayers was enhanced to eight years from the current five years.

“This will increase the burden on the taxpayers in terms of retention of record, besides creating a sense of uncertainty among the legitimate taxpayers,” the OICCI commented.

Pointing to the clause (Section 16c) that would extend the input tax on machinery and fixed assets to be claimed in 12 months starting from the month of purchase, the OICCI said the change would have a significant negative impact on the cash flow and book-keeping.

It described as incomprehensible the withdrawal of tax exemption from data and internet services, except for students using up to Rs1,500 worth of services.

Govt considering withdrawing banks’ special tax regime

In view of the already high sales tax rate of 19.5%, it said, the change had the potential to seriously impact the expansion of digital services, education and various e-projects launched by the Punjab government.

The OICCI urged revenue authorities to improve the taxation structure, making it fair, equitable, simple, efficient and effective so that the country was able to substantially reduce the quantum of its huge undocumented economy.

Published in The Express Tribune, June 15th, 2017.

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