September
09, 2014
The irrational tax policy and unnecessary enforcement and
legal action against the computer industry has resulted in massive decline in
documented/regulated imports of IT equipment and decreasing their contribution
to taxes.
Industry sources told Business Recorder here on Monday that the FBR Chairman Tariq Bajwa should immediately intervene and save the computer vendors from total collapse due to wrong application of tax policy and enforcement action against the vendors at a time when imports of computer accessories have already came down due to a recent past FBR intelligence agency's action against the importers of computer hardware and allied equipment on the allegations of tax evasion.
At the same time, the Regional Tax Office (RTO) Islamabad has also framed cases against the computer vendors for claiming inadmissible sales tax adjustment against supplies made by the dummy units. According to the industry, the said units were not blacklisted at the time when purchases were made from them. It is illegal to frame cases against the units on the assumption that they made purchases from fake units despite the fact that the units were active at the time of supply. How, a purchaser would know that the supplier unit would be blacklisted or made inactive after 2-3 years? Experts raised question.
Such kind of illegal enforcement actions against the computer vendors are not covered under any provision of the Sales Tax Act or rules in view of the fact that buying and selling took place between the two documented units in the past.
When contacted, Munawar Iqbal President Central Pakistan Computers Association opined that computer industry is facing multiple issues due to wrong tax policy, notices of tax department, legal action against FBR's agencies and harassment to vendors having direct negative impact on the FBR's revenue collection.
The computer accessories and allied equipment vanished from the market creating serious shortage for the consumers. The computer vendors are very much harassed due to ongoing legal action against them. The vendors have already stopped imports resulting in non-availability of computers, laptops and their parts etc in the market. On one side, the RTOs are issuing illegal notices to the vendors whereas on the other tax department has framed illegal cases of sales tax adjustments. If the FBR Chairman Tariq Bajwa is not going to intervene to hear the grievances of the industry, the revenue collection from this sector would be in negative during 2014-15, Munawar Iqbal added.
The documented/regulated imports of IT equipment is showing gradual decline as a result of FBR intelligence agency's action against the importers of computer hardware and allied equipment on the allegations of tax evasion, industry sources revealed. Consequently, availability of the imported computer hardware has gone down drastically, creating shortage in the local market. The action against one big importer on alleged evasion of duties and taxes turned as an alarm-bell for others to avoid any similar kind of treatment.
Industry sources said that most of the importers are also distributors and they have limited their imports of IT equipment mainly laptops on the apprehension of facing similar action. The small and medium businessmen and vendors in computer sector are major sufferers and most of them are planning to leave the business. It is apprehended that the equipment like laptops, toners and cartridges etc would totally vanish from the market in coming days due to shortage.
In budget (2014-15), the computer industry had proposed fixed tax regime of Rs 1,500 per computer in federal budget 2014-15 which would add three times to revenue collection from commercial importers and vendors. The fixation of taxes on the import of computers and laptops would result in sudden jump in revenue collection within the existing taxation structure.
At present, the overall incidence of duties and taxes comes to 27 percent on the import of computers. Break-up of 27 percent taxes revealed 17 percent general sales tax (GST), 3 percent value added tax, 5.5 percent income tax and 0.85 percent Sindh Excise Duty along with miscellaneous expenses of 0.65 percent. This has resulted in overall taxes to the tune of 27 percent. This will not only discourage imports of computers through legal channel, but also result in low revenue collection from the computer industry. The fixed tax scheme for the computer vendors would result in increase in revenue collection in 2014-15.
The current tax structure revealed that the incidence of taxes is very high on the import of computers and fixation of taxes on each PC/laptop would give sudden jump to the revenue collection from the vendors and importers of computers. The data analysis revealed that the trend of revenue collection showing nominal increase in case the existing arrangement continues in 2014-15. On the other hand, fixed tax scheme on the import of computers would encourage voluntary compliance and expand the tax base by encouraging documented imports. The tax authorities must intervene take the situation seriously for smooth functioning of the IT sector, they added.
Industry sources told Business Recorder here on Monday that the FBR Chairman Tariq Bajwa should immediately intervene and save the computer vendors from total collapse due to wrong application of tax policy and enforcement action against the vendors at a time when imports of computer accessories have already came down due to a recent past FBR intelligence agency's action against the importers of computer hardware and allied equipment on the allegations of tax evasion.
At the same time, the Regional Tax Office (RTO) Islamabad has also framed cases against the computer vendors for claiming inadmissible sales tax adjustment against supplies made by the dummy units. According to the industry, the said units were not blacklisted at the time when purchases were made from them. It is illegal to frame cases against the units on the assumption that they made purchases from fake units despite the fact that the units were active at the time of supply. How, a purchaser would know that the supplier unit would be blacklisted or made inactive after 2-3 years? Experts raised question.
Such kind of illegal enforcement actions against the computer vendors are not covered under any provision of the Sales Tax Act or rules in view of the fact that buying and selling took place between the two documented units in the past.
When contacted, Munawar Iqbal President Central Pakistan Computers Association opined that computer industry is facing multiple issues due to wrong tax policy, notices of tax department, legal action against FBR's agencies and harassment to vendors having direct negative impact on the FBR's revenue collection.
The computer accessories and allied equipment vanished from the market creating serious shortage for the consumers. The computer vendors are very much harassed due to ongoing legal action against them. The vendors have already stopped imports resulting in non-availability of computers, laptops and their parts etc in the market. On one side, the RTOs are issuing illegal notices to the vendors whereas on the other tax department has framed illegal cases of sales tax adjustments. If the FBR Chairman Tariq Bajwa is not going to intervene to hear the grievances of the industry, the revenue collection from this sector would be in negative during 2014-15, Munawar Iqbal added.
The documented/regulated imports of IT equipment is showing gradual decline as a result of FBR intelligence agency's action against the importers of computer hardware and allied equipment on the allegations of tax evasion, industry sources revealed. Consequently, availability of the imported computer hardware has gone down drastically, creating shortage in the local market. The action against one big importer on alleged evasion of duties and taxes turned as an alarm-bell for others to avoid any similar kind of treatment.
Industry sources said that most of the importers are also distributors and they have limited their imports of IT equipment mainly laptops on the apprehension of facing similar action. The small and medium businessmen and vendors in computer sector are major sufferers and most of them are planning to leave the business. It is apprehended that the equipment like laptops, toners and cartridges etc would totally vanish from the market in coming days due to shortage.
In budget (2014-15), the computer industry had proposed fixed tax regime of Rs 1,500 per computer in federal budget 2014-15 which would add three times to revenue collection from commercial importers and vendors. The fixation of taxes on the import of computers and laptops would result in sudden jump in revenue collection within the existing taxation structure.
At present, the overall incidence of duties and taxes comes to 27 percent on the import of computers. Break-up of 27 percent taxes revealed 17 percent general sales tax (GST), 3 percent value added tax, 5.5 percent income tax and 0.85 percent Sindh Excise Duty along with miscellaneous expenses of 0.65 percent. This has resulted in overall taxes to the tune of 27 percent. This will not only discourage imports of computers through legal channel, but also result in low revenue collection from the computer industry. The fixed tax scheme for the computer vendors would result in increase in revenue collection in 2014-15.
The current tax structure revealed that the incidence of taxes is very high on the import of computers and fixation of taxes on each PC/laptop would give sudden jump to the revenue collection from the vendors and importers of computers. The data analysis revealed that the trend of revenue collection showing nominal increase in case the existing arrangement continues in 2014-15. On the other hand, fixed tax scheme on the import of computers would encourage voluntary compliance and expand the tax base by encouraging documented imports. The tax authorities must intervene take the situation seriously for smooth functioning of the IT sector, they added.
brecorder.com
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