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Finance Minister Asad Umer would inaugurate National Tax Conference in March 2019 for bringing federal and provincial tax authorities on one page and proposing tax measures in consultation with the tax experts and business community/investors.

Due to its role as the national leader of the accountancy profession, the Institute of Chartered Accountants of Pakistan (ICAP) has shared a close relationship with the government of Pakistan. The Institute with its commitment to serve public interest has always supported efforts to secure country’s prosperity by advising the government on public policy that simultaneously serves all the stakeholders.

The Institute’s Committee on Fiscal Laws, headed by Ashfaq Yousuf Tola, taking cognisance of various taxation issues hindering growth of the economy is organising a full day National Tax Conference in March 2019 in Islamabad.

The finance minister has accepted to be the chief guest. Other senior officials have also been invited from the Ministry of Finance, FBR, Ministry of Commerce, Ministry of Industries, Engineering Development Board and chiefs of respective provincial tax authorities. Stakeholders representing industry in Pakistan including, Pakistan Business Council (PBC), FPCCI, OICCI and Tax Bar Associations, have also been invited.

The Competition Commission of Pakistan (CCP) has termed the Federal Board of Revenue’s tax policy for real estate sector as unfair and recommended formulation of tax policy in consultation with the stakeholders to maximise its effectiveness and assist in widening the tax net.

According to the CCP opinion on real estate sector issued Monday, the tax policies of the government are ‘unfair’. The stakeholders are willing to pay taxes, however, the tax policy should be formulated in collaboration with the important stakeholders to maximize its effectiveness and assist in widening of the tax net. It should be levied gradually and uniformly as millions of people are associated with it.

The CCP report said laws for individual business taxation of different lands many vary, for example; capital gains is levied under the Income Tax Ordinance, 2001, whilst the capital value tax on the immoveable property, subsequent to the 18th Amendment in the Constitution has been levied by the Provinces through separate provincial legislations and in the Islamabad Capital Territory by the Finance Act, 2012.

Securities and Exchange Commission of Pakistan (SECP) had introduced the Real Estate Investment Trusts Regulations (REITs), 2015 introduced the concept of real estate investment trusts. Any income from such trust is exempt from tax, subject to the condition that not less than 90 percent of its profits for the year is distributed amongst the unit holders. The REITs Regulations have been amended in December 2018 by the SECP. The amendments include the concept of private investors, details on eligibility criteria to invest in REIT scheme, introduction of grace period for mandatory listing, requirement of valuation from two separate property valuers at the time of transfer of real estate to REIT scheme, enhancing REIT Management Company’s (RMCs) capacity to borrow and issue right units. The amendments also include the requirement of unit holders’ approval in case of major decisions pertaining to REIT in order to protect their interest and enhance their role in the decision making process.

The real estate sector operators made their fortune owing to a regulatory vacuum and inefficient revenue machinery, as the federal and provincial governments looked the other way for political reasons. In the process, tens of thousands of gullible individuals lost their life time earnings amid scattered legislation and governing bylaws in municipalities and local governments. No wonder therefore, that the property industry suffered from serious credibility challenges – low public confidence, unfair business practices, weak transparency and limited financial inclusion. All provincial governments failed to effectively bring a booming sector into the real economy and pay even a fraction of what real estate agents earned.

An ambitious revenue measure launched last year by the federal government through capital value tax and revised valuation of properties finally ended in yet another tax amnesty. An overwhelming chunk of the housing schemes continue to be governed under the Cooperatives Societies Act of 1925, or specific acts of parliament for various development authorities, CCP said.

The key regulators – the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) – have been advising the government to provide an overarching legal framework to bring these fly-by night investors into the formal economy. Taking a step forward, the government has now brought the property sector in the ambit of the Companies Act of 2017. Under the new law, companies would also not be eligible to accept a sum against purchase of the apartment, plot or building, as the case may be, as an advance payment from a person without first entering into a written agreement for sale with such person.

Another major concern pointed out by various participants is that accurate and systematic records related to various forms of property available for sale and purchase are not maintained. Consequently, various issues arise. Unreliable and insufficient data hinders the mutation or transfer of property, both commercial and residential. Other problems caused by such inadequacies include multiple sale of the same property, over-pricing of property, resultant unfair taxation and tax evasion, fraud, etc, the CCP report added.

With a view to further improving the ease of doing business, the federal government is taking steps to club all taxes into one tax in the next federal budget following which there will be a single tax collector and businessmen will have to pay a single tax and file only a single tax return.

Federal Finance Minister Asad Umer made this announcement while speaking at the Lahore Chamber of Commerce and Industry on Monday. He said this step is being taken to facilitate businesspeople who are paying various taxes. Minister of State for Revenue Hammad Azhar, Federal Board of Revenue (FBR) Chairman Dr Muhammad Jahanzeb Khan, Punjab Minister for Industries, Trade and Investment Mian Aslam Iqbal also spoke on the occasion.

He said that trust building between the government and business community is need of the hour as private sector will be leading economy in the 21st century while government would act as a facilitator. He said that the FBR and private sector would have to give respect to each other. “Promissory note for industrial sector was the idea of private sector that would help resolve the liquidity issue,” he added.

To a question, he said that interest rate is the matter of central bank, adding that savings are a must for sustainable economic development. Last year, savings were only 10.4 per cent which should be 25 to 28 per cent to achieve the annual growth target of 7 per cent. The State Bank of Pakistan would have to maintain a balance, he added.

He said industries are provincial subject after the 18th Amendment. Federal and provincial governments would take stakeholders on board to get their valuable feedback. He said that special economic zones are of utmost importance. Neither politicians nor bureaucrats are trained to run industrial estates. “I believe that operations of these SEZs should be in the hands of private sector,” he opined, adding that a task force has been formed and soon a package will be announced for the IT sector.

He said an 11-member board has been formed for “Sarmaya Pakistan” that would have eight representatives, including chairman, from private sector while the remaining will be from the government side.

About tourism, the Minister said the government is taking steps to tap the tourism industry potential. Malaysia earned US $23 billion while Turkey gained $43 billion from tourism, he added. Talking to media persons, Asad Umar said there is a visible difference between the PTI government and the previous ones which increased GST to raise revenue while we did not shift burden to the masses.

Responding to a question, the Minister said that the Prime Minister is going to launch “Pakistan Banao Certificate” on January 31 for expat Pakistanis which would provide them investment opportunities. However, there would be no specific amount or tenor of the certificate, he added. About the IMF package, he said: “We are not in a hurry to sign agreement so that the country may not face an adverse effects.”

To another question on achieving revenue target, the Minister said the target of Rs 4398 billion given to the FBR would be achieved comfortably.

Earlier, speaking at the Federation of Pakistan Chambers of Commerce and Industry Regional Office, Asad Umar said that matters relating to special economic zones, situation of existing economic zones and cotton crop strategy for 2019 have been placed in the next meeting of Economic Coordination Committee (ECC) that would be held on February 5 while the government has focused on SMEs, cottage industry and small traders to exploit country’s economic growth potential. He said the matter relating to cotton production has been placed before the ECC while agriculture ministers from Sindh and Punjab have also been invited to help chalk out strategy for future crops. Besides, the Board of Investment has been directed to brief the ECC about the facilities in existing economic zones besides suggestions to improve the missing facilities and future plans for SEZs.

The Federal Minister said that old system of power distribution and tariff would have to be deregulated besides framing of new rules and regulations.

Speaking at the LCCI, Minister of State for Revenue Hammad Azhar said that Standard Operating Procedures (SOPs) are being evolved for issuance of tax exemption certificates. He said raids on business premises have been ceased and SOPs are being formed in this regard as well. He said that tax reforms implementation committee is playing an active role while tax policy and tax administration are being separated.

FBR Chairman Dr. Jahanzeb Khan said FBR reforms are one of the top priorities of the government for trust building. He said alternative dispute resolution mechanism is being promoted to settle issues out of court. “The Lahore Chamber will be FBR’s partner in this regard,” he said, adding that tax-to-GDP ratio would have be made better.

Provincial Minister Mian Aslam Iqbal said that the draft of industrial policy has been approved by the cabinet. The cabinet has also passed labour deletion policy while rules and regulations for land lease policy would be forwarded to the cabinet for approval soon.

LCCI President Almas Hyder said the benefit of the payment of refunds through promissory note should also be extended to all the other sectors in addition to five zero-rated sectors. The government should rezone urban centres, demarcate industrial land and set up SEZs all over Pakistan. He also urged the government to announce tax holiday for new SMES.