Federal Board of Revenue (FBR) has been suggested to abolish Final Tax Regime (FTR) for commercial importers and other segment of the economy in order to make the taxation system equitable.
FBR sources said that suggestions had been received from business community and large business houses to eliminate the FTR and presumptive tax regime.
The sources said that large private sector entities and chartered accountants urged the newly appointed chairman Shabbar Zaidi, who is also a chartered accountant and had represented Institute of Chartered Accountants of Pakistan (ICAP), to status of normal tax regime for commercial importers should be restored.
The ICAP in its tax proposal for tax year 2019/2020 said that certain sectors/goods are being taxed under the presumptive/value added/ fixed/ final tax regimes.
The presumptive/value added/fixed/final tax regimes are taxing turnover as opposed to income. In addition, entities availing this regime are not required to file tax returns.
“Under garb of the FTR, massive evasion of customs duties and sales tax are taking place putting the formal sector under undue pressure.”
The informal economy has outgrown the formal economy and the major driver of this has been the FTR.
The FBR said that the chartered accountants were strongly supporting elimination of FTR for commercial importers and recommended: “commercial importers status under Normal Tax Regime as introduced through the Finance Act, 2018 should be restored.”
They said that the presumptive/ value added/ fixed / final tax regime should be replaced with a normal tax regime.