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Business Recorder
25-06-2025
- Business
- Business Recorder
Arbitrary powers
EDITORIAL: The Overseas Investors Chamber of Commerce and Industry (OICCI) has raised strong concerns, understandably so, over the recent government proposal — inserted in the Finance Bill 2025-26 — that grants sweeping powers of arrest and prosecution to the Federal Board of Revenue (FBR) officials, without adequate checks and balances. In a letter addressed to Finance Minister Muhammad Aurangzeb, Secretary General of OICCI has said that such arbitrary measures, without thorough consultation with key stakeholders and consideration of its potential impact on the business environment, add to a negative perception of the country as a business (un)friendly destination. The intention behind the proposal may be to deter tax evasion and strengthen enforcement, but it could easily backfire by creating fear and mistrust among investors. The OICCI is rightly worried that granting arrest powers to tax officials would open the door to potential misuse, harassment, and overreach, resulting in unwarranted arrests, legal battles, and reputational damage for companies. In fact, leaders of almost all political parties — when out of power — have faced such punitive measures provided for in the National Accountability Bureau (NAB) law. It was to guard against such abuses that a while ago the accountability law was amended to significantly soften some of its harshest provisions. The ruling coalition should have known better than to allow similar high-handedness under the FBR. In any regulatory system, especially one as sensitive as taxation, the enforcement mechanisms need to be based on clear, irrevocable guidelines. As regards the issue at hand, local investors would be the first to react to the new policy. Faced with the threat of arrest over alleged discrepancies – such as those arising from management errors, disputes, or differing interpretations — they may scale back operations or shift to the informal sector, and reduce the already small tax base. Local investors' lack of trust in the system will not be ignored by foreign investors. In fact, foreign companies are known to fully evaluate investment destinations based on a combination of factors, such as political stability, continuity of policies, regulatory clarity, and how local enterprises are treated. Instead of increasing tax officials' powers the government focus ought to be on reforming and modernising the FBR. To ensure compliance, conversations in public forums have repeatedly been highlighting the need for digitising relevant processes to reduce human contact between the FBR officials and potential taxpayers. Rather than resorting to arbitrary arrest and prosecution the government needs to weigh the long-term economic costs of such measures against short-term enforcement benefits. It must think of more constructive avenues for increasing tax collection. Copyright Business Recorder, 2025
Business Recorder
21-06-2025
- Business
- Business Recorder
FBR officials: OICCI says concerned at proposed arrest powers
KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has expressed serious concerns over the proposed powers of arrest granted to Federal Board of Revenue (FBR) officials under the Finance Bill 2025-26, warning that the move has significantly undermined investor confidence, particularly among foreign stakeholders. In a letter addressed to Finance Minister Muhammad Aurangzeb, the OICCI expressed deep concern over proposed amendments in the Finance Bill 2025-26, relating to Section 37 AA of the Sales Tax Act, 1990, seeking to extend wide powers to the Inland Revenue officials relating to arrest/prosecution without necessary check and balance. The chamber criticized the provision for granting sweeping powers of arrest and prosecution to Inland Revenue officials without adequate checks and balances, which it believes could lead to misuse and harassment of businesses. Tax laws: PM directs formation of arrest powers review panel 'Local business leadership has also reacted very negatively to the proposed measure; however, this move has dented the confidence of the leadership of our 200-plus members belonging to over 30 countries,' Abdul Aleem Chief Executive and Secretary General OICCI said in the letter. He said that such arbitrary measures, without thorough consultation with key stakeholders or due consideration of its potential impact on the business environment, add to the negative perception of the country as a business-friendly destination for local and foreign investors. OICCI has also appreciated the timely intervention from Prime Minister, Mian Shehbaz Sharif, Finance Minister Muhammad Aurangzeb and senior members of Parliament in ensuring that such far-reaching and potentially disruptive proposals are not enacted without rigorous oversight and due diligence. He said there should be any consideration to retain this clause for exceptional circumstances, the OICCI looks forward to reviewing the specific safeguards proposed to prevent misuse. In the Chamber's view, at a minimum, explicit prior approval from the FBR Chairman should be mandated in any such extraordinary case involving the arrest of an alleged defaulter. The OICCI further emphasized its trust that the government leadership and relevant authorities including the FBR fully recognize the potential reputational damage that such unnecessary and excessive measures could cause to Pakistan's image as a welcoming and dependable destination for both foreign and domestic investors. The OICCI has also conveyed its concerns to FBR Chairman Rashid Mahmood Langrial and urged a reconsideration of the proposed clause. Copyright Business Recorder, 2025
Business Recorder
12-06-2025
- Business
- Business Recorder
Pakistan govt's budget steps may hinder cashless economy drive: TOAP
ISLAMABAD: As the government unveils a raft of new taxes on digital transactions and e-commerce in the federal budget, Aamir Ibrahim, chairman Telecom Operators Association of Pakistan voiced both hope and concern, warning that the measures could slow Pakistan's journey toward a cashless economy. Industry leaders, trade bodies, and associations also expressed concerns that the budget missed an important opportunity to mandate digital payment options across retail. They pointed out that many major retailers still refuse to accept digital payments in order to hide real income and evade taxes, indicating that enforcement against such practices remains insufficient. This gap, they argued, allows tax evasion to persist and undermines efforts to bring more transactions into the formal, documented economy. The Overseas Investors Chamber of Commerce and Industry (OICCI) also criticised the government for missing a crucial opportunity to broaden the tax base and document the country's vast Rs9 trillion cash-based informal economy. In a statement, the OICCI noted that while measures like the nationwide rollout of e-invoicing and expansion of POS systems are positive steps; the absence of a concrete strategy to address the informal sector and rationalise tax structures undermines efforts to create a more investment-friendly environment and advance economic formalisation. 'The budget aims to formalise online trade through digital integration and tax measures, which is a plus,' said Aamir. 'However, complexity in tax collection, the 5% levy on digital transactions with foreign vendors, and additional taxes charged by payment intermediaries risk increasing costs and discouraging digital adoption. Making digital payments more prevalent, easier, and affordable is essential for Pakistan's growth and for documenting the economy. Let's ensure policies support a truly digital Pakistan, driving transparency and compliance without undue burdens.' The new Finance Bill introduces taxes on both local and foreign e-commerce marketplaces, making online shopping costlier for Pakistani consumers. Notably, a five per cent tax will be imposed on goods purchased from foreign online marketplaces such as AliExpress and Amazon, collected by banks and payment gateways at the point of transaction. Meanwhile, local digital payments will face a tiered tax structure, ranging from one per cent to two per cent depending on the transaction amount, and courier companies will collect taxes on cash-on-delivery payments. Banks and courier services have been designated as withholding agents, required to collect and remit these taxes, and file detailed statements on all digital transactions. Online marketplaces must also ensure that all vendors are registered for sales tax, tightening compliance across the sector. Aamir acknowledged the government's intent to bring more online activity into the formal economy but cautioned that the added complexity and cost could push some businesses and consumers back toward cash and informal channels. 'We need to strike a balance between expanding the tax net and fostering digital inclusion. If digital transactions become more expensive or cumbersome, we risk undermining the very progress we've made in financial inclusion and digital transformation.' He urged policymakers to revisit the proposed levies and streamline tax collection, so that Pakistan's vision of a cashless, digitally empowered society remains within reach. 'There is still time to fix anomalies in the new budget. Let's make sure that our policies truly support a digital Pakistan, rather than create new barriers to adoption.' Copyright Business Recorder, 2025
Business Recorder
12-06-2025
- Business
- Business Recorder
Budget steps may hinder cashless economy drive: TOAP
ISLAMABAD: As the government unveils a raft of new taxes on digital transactions and e-commerce in the federal budget, Aamir Ibrahim, chairman Telecom Operators Association of Pakistan voiced both hope and concern, warning that the measures could slow Pakistan's journey toward a cashless economy. Industry leaders, trade bodies, and associations also expressed concerns that the budget missed an important opportunity to mandate digital payment options across retail. They pointed out that many major retailers still refuse to accept digital payments in order to hide real income and evade taxes, indicating that enforcement against such practices remains insufficient. This gap, they argued, allows tax evasion to persist and undermines efforts to bring more transactions into the formal, documented economy. The Overseas Investors Chamber of Commerce and Industry (OICCI) also criticised the government for missing a crucial opportunity to broaden the tax base and document the country's vast Rs9 trillion cash-based informal economy. In a statement, the OICCI noted that while measures like the nationwide rollout of e-invoicing and expansion of POS systems are positive steps; the absence of a concrete strategy to address the informal sector and rationalise tax structures undermines efforts to create a more investment-friendly environment and advance economic formalisation. 'The budget aims to formalise online trade through digital integration and tax measures, which is a plus,' said Aamir. 'However, complexity in tax collection, the 5% levy on digital transactions with foreign vendors, and additional taxes charged by payment intermediaries risk increasing costs and discouraging digital adoption. Making digital payments more prevalent, easier, and affordable is essential for Pakistan's growth and for documenting the economy. Let's ensure policies support a truly digital Pakistan, driving transparency and compliance without undue burdens.' The new Finance Bill introduces taxes on both local and foreign e-commerce marketplaces, making online shopping costlier for Pakistani consumers. Notably, a five per cent tax will be imposed on goods purchased from foreign online marketplaces such as AliExpress and Amazon, collected by banks and payment gateways at the point of transaction. Meanwhile, local digital payments will face a tiered tax structure, ranging from one per cent to two per cent depending on the transaction amount, and courier companies will collect taxes on cash-on-delivery payments. Banks and courier services have been designated as withholding agents, required to collect and remit these taxes, and file detailed statements on all digital transactions. Online marketplaces must also ensure that all vendors are registered for sales tax, tightening compliance across the sector. Aamir acknowledged the government's intent to bring more online activity into the formal economy but cautioned that the added complexity and cost could push some businesses and consumers back toward cash and informal channels. 'We need to strike a balance between expanding the tax net and fostering digital inclusion. If digital transactions become more expensive or cumbersome, we risk undermining the very progress we've made in financial inclusion and digital transformation.' He urged policymakers to revisit the proposed levies and streamline tax collection, so that Pakistan's vision of a cashless, digitally empowered society remains within reach. 'There is still time to fix anomalies in the new budget. Let's make sure that our policies truly support a digital Pakistan, rather than create new barriers to adoption.' Copyright Business Recorder, 2025
Business Recorder
11-06-2025
- Business
- Business Recorder
Corporate tax rate issue: OICCI disappointed over limited govt progress
KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has expressed disappointment over the government's limited progress in addressing inequitable corporate tax rate in the recent budget. It said while the marginal reduction in Super Tax rates is acknowledged, OICCI reiterates the urgent need for a comprehensive overhaul of tax structures to enhance Pakistan's competitiveness and attract foreign investment. The Chamber also notes the absence of meaningful reductions in government expenditure, which could have helped narrow the budget deficit. Fiscal discipline remains critical to ensuring macroeconomic stability, and OICCI urges the government to prioritize expenditure rationalisation in its budgetary measures. OICCI regrets the government's missed opportunity to broaden the tax base in the current budget, particularly the absence of any concrete strategy to document Pakistan's substantial Rs. 9 trillion cash-based informal economy - a critical measure for meaningful revenue enhancement and economic formalization that the Chamber has consistently advocated for OICCI welcomes several positive reforms, including simplified tax returns for salaried individuals and small businesses, the nationwide rollout of e-invoicing, and the expansion of POS systems, all measures long advocated by the Chamber. However, their success hinges on effective implementation, and OICCI stresses the need for transparency and consistency in execution. The increase in the tax exemption threshold for salaried individuals (from Rs. 0.6 million to Rs. 1.2 million) and the reduction in their tax rate (from 5 percent to 1 percent) are commendable steps that align with OICCI's recommendations but still fall short of providing impactful and necessary relief to reduce ongoing brain drain in the country. OICCI also acknowledges the government's gradual phasing out of tax exemption on FATA and PATA and the government's stricter measures against non-compliant taxpayers, including restrictions on property and vehicle purchases, asset transfers abroad, and enhanced penalties. Such actions are crucial for improving tax compliance and broadening the revenue base. Despite these advancements, the budget falls short of introducing transformative policies for the corporate sector. OICCI emphasises that gradually rationalising tax slabs and reducing the overall tax burden on businesses are essential to promoting a more investment-friendly environment. Copyright Business Recorder, 2025
