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Express Tribune
6 days ago
- Business
- Express Tribune
Govt restricts FBR arrest powers
Listen to article The government on Wednesday made it mandatory for tax officials to consult at least two representatives of the business community before initiating investigations that could lead to arrests in tax fraud cases, watering down any real chances of detaining accused individuals. In line with the understanding reached between the business community and the government, the Federal Board of Revenue (FBR) has issued a Sales Tax General Order outlining a lengthy procedure before traders or any businesspersons involved in alleged sales tax frauds can be arrested. The order states that, after concluding an inquiry in tax fraud cases, the commissioner inland revenue of the FBR "shall not give approval to initiate investigation unless he has obtained approval from the member (inland revenue operations) of the board." However, the caveat is that the FBR commissioner cannot seek the member's approval until he convinces the business community that fraud has indeed occurred and that there are sufficient grounds to justify an arrest. "Before seeking approval of the member inland revenue operations, it is binding upon the commissioner to consult with two representatives of the business community from among such representatives as notified by the board." A cursory look at the general order indicates that it will now be next to impossible for the FBR to arrest anyone, given the cumbersome process outlined. The government had obtained arrest powers for the FBR through the budget, a move that had sparked nationwide criticism. The Pakistan Peoples' Party (PPP) had equated the FBR's arrest powers with those of the National Accountability Bureau (NAB) and initially refused to support them. However, PPP later reached a compromise after the government inserted several safeguards into the law to address the concerns of its key coalition partner in the National Assembly. The government had vowed to raise Rs389 billion through enforcement measures during the current fiscal year. The FBR had been granted powers to prohibit major purchases like cars and homes, penalise cash expenses over Rs200,000, and arrest tax defaulters. However, through three different notifications issued this week, the government has diluted these punitive powers, effectively taking FBR back to square one vis-à-vis traders. This continued leniency towards traders has put the salaried class at a disadvantage. Salaried individuals paid a record Rs555 billion in taxes, whereas there are no independently verified or credible figures for income tax paid by traders during the last fiscal year. According to the new general order, the FBR "shall not initiate an inquiry unless approval from the commissioner has been obtained." Even after completing an inquiry, the commissioner cannot proceed further unless he has satisfied the business community and has obtained the necessary approval from the member inland revenue operations. The order states that various trade bodies will nominate their representatives, from which the FBR will pick two representatives for each region. Each trade body listed must nominate two individuals who "should be compliant and reasonably significant taxpayers." The member inland revenue operations will nominate two persons for each region for consultation from among those nominated by the trade organisations, based on their income tax payments for the latest tax year, export contributions, and compliance history, according to the order. The member inland revenue operations may not select more than one person from any single nominating trade organisation within a region. The FBR has listed the Pakistan Business Council, Lahore Chamber of Commerce and Industry, Federation of Pakistan Chambers of Commerce and Industry, Sialkot and Gujranwala Chambers, All Pakistan Textile Mills Association, Faisalabad Chamber of Commerce and Industry, Multan Chamber of Commerce and Industry, Islamabad Chamber of Commerce and Industry, Rawalpindi Chamber of Commerce and Industry, Overseas Investors Chamber of Commerce and Industry, Karachi Chamber of Commerce and Industry, Quetta Chamber of Commerce and Industry, Hyderabad Chamber of Commerce and Industry, and Sarhad Chamber of Commerce and Industry. Based on geographical location, the FBR will notify a two-member trader representative committee for each separate region. This week, tax authorities informed Prime Minister Shehbaz Sharif that the FBR suffered a setback due to compromises made with the business community, according to sources. After initially claiming to go after wealthy, under-taxed individuals by banning their major purchases and disallowing the treatment of large cash deposits as banking transactions, the government has now reversed course. The FBR has also amended its position on cash expenses, stating that "when a person, whether a national tax number holder or otherwise, deposits the cash against invoices in the bank account of the seller, the payment shall be treated as having taken place through banking channel and no disallowance of the expenditure will be made in this regard under this clause." The government has also decided not to immediately ban the purchase of cars, homes, plots, and investments in stocks by ineligible persons. Officials have acknowledged that this decision is a significant setback and effectively negates recent enforcement efforts, taking both the FBR and the government back to square one in their dealings with the trader community.
Express Tribune
24-07-2025
- Business
- Express Tribune
Retail sector pays extra Rs455b
Listen to article The Prime Minister's Office said on Wednesday that the retail sector paid an additional income tax of Rs455 billion in the last fiscal year, a startling claim made on the basis of a briefing given by tax authorities. In an official statement released by the PM Office, it was stated "in the retail sector, tax collection increased by Rs455 billion compared to the previous year, driven by the integration of point-of-sale systems and stricter enforcement". Officials of the Federal Board of Revenue (FBR) claimed that total income tax payments made by the retail sector in fiscal year 2024-25 were in fact Rs617 billion and the additional income tax was Rs455 billion. They said that the collection of Rs617 billion included Rs316 billion in quarterly advances given by three categories, wholesalers, retailers, traders and some companies. The surprising Rs316 billion in quarterly advance could be looked into with critical lenses due to the highly informal nature of the sector. Sources in the FBR told The Express Tribune that a loose definition of the retail sector was used, which included some corporate sector firms. The official statement added that Prime Minister Shehbaz Sharif chaired a review meeting on the ongoing reforms in the FBR, lauding the progress made so far while stressing the need for sustained and time-bound efforts to overhaul the tax system in line with modern requirements. Sources said that during the meeting discussions took place on the share of retail and manufacturing sectors and the record tax contribution of Rs555 billion made by the salaried class. Some of the participants were of the view that the manufacturing sector and salaried individuals were highly overburdened compared to their contribution to the economy. According to Pakistan Bureau of Statistics' (PBS) data, the share of the manufacturing sector in the economy was hardly 12% while the share of wholesale and retail sectors was 18% in FY25. FBR spokesman Dr Najeeb Memon did not respond to a question about the breakdown of additional income tax of Rs455 billion collected from the retail sector. However, an FBR official said that it was a definitional issue as various categories were included in the retail sector and as a result total income tax contribution reached Rs617 billion. With the additional Rs455 billion, the total income tax collection from the retail sector should have been Rs940 billion. In fiscal year 2023-24, the collection was Rs484 billion on the basis of the new loose definition, said the sources. Retailers and traders are functioning under a highly informal mechanism. According to the input the FBR has used for claiming the collection of Rs617 billion and an additional Rs455 billion, the wholesalers, traders and retailers are treated as part of the retail sector. These three categories paid income tax in the shape of advance income tax on a quarterly basis, admitted income tax with annual returns, withholding taxes on sales, purchases, imports and electricity bills, and other taxes. FBR officials claimed that the collection of Rs617 billion included Rs316 billion in advance income tax. In the advance tax, Rs30 billion was paid by wholesalers, Rs49 billion by traders and Rs316 billion by retailers. Likewise, the admitted income tax stood at Rs28 billion, including Rs14 billion from traders, Rs5.3 billion from retailers and Rs8.5 billion from wholesalers, the sources said, adding that these three categories also paid Rs216 billion in withholding taxes. Of this, the wholesalers paid Rs28 billion, traders Rs119 billion and retailers Rs69 billion. In the category of others, Rs57 billion in income tax was paid by these three categories. However, if one goes by the definition of the retail sector and its contribution, the sources said, in FY24, payments by the retail sector were Rs484 billion and in this case the net increase was Rs133 billion. The PM Office statement said that Shehbaz Sharif told the meeting that recent improvements in the tax machinery were "encouraging," but reforms must lead to the creation of a sustainable, digitised and facilitative tax system. The PM directed the FBR to accelerate digital transformation, restructure its digital wing with a clear roadmap and enhance enforcement to curb the informal economy. He also stressed the importance of stakeholder consultation in the reform process, particularly with businesses, traders and taxpayers. He reiterated that improvement in the tax system should contribute to boosting national revenue while reducing the tax burden on the common citizen. The meeting was briefed that as a result of reforms and enforcement measures, the tax-to-GDP ratio registered a historic rise of 1.5% in FY25 compared to FY24. However, the FBR missed the IMF condition to increase the ratio to 10.6% despite imposing record taxes. The PM Office said that the number of income tax return filers surged from 4.5 million in 2024 to over 7.2 million by June 30, 2025. FBR officials also reported significant progress under the faceless customs clearance system, which increased revenue and was expected to reduce clearance time from 52 hours to just 12 hours in the next three months.
Express Tribune
04-07-2025
- Business
- Express Tribune
Salaried class paid Rs555b in FY24
Listen to article Salaried individuals have paid a staggering Rs555 billion in income tax in the last fiscal year, which were Rs188 billion more than the preceding year and also 100% more than the combined taxes paid by retailers and real estate sector. The record-high contributions by people, who pay income tax on the gross salaries without having the luxury to adjust their expenses, substantially reduced the home-take salaries of a larger segment of society. According to provisional figures compiled by the Federal Board of Revenue, the salaried persons paid Rs555 billion in income tax during the fiscal year 2024-25. The unwilling contributions were 51% or Rs188 billion more than the taxes collected from the salaried persons in the preceding fiscal year. In the fiscal year 2023-24, the government had collected Rs367 billion from the salaried persons. The government of Prime Minister Shehbaz Sharif had phenomenally increased the tax burden of the salaried class and claimed it would generate only Rs75 billion in additional income taxes. The highest ever contributions by the salaried persons in a single year showed how the voiceless people have been discriminated against the powerful sectors of the country. Last month, the government marginally reduced the tax burden of the people earning up to Rs3.2 million annually, which it said would give them a benefit of Rs56 billion. This nominal benefit of Rs56 billion compared to the current contributions is like a drop in the bucket, which would not address the fiscal woes of the salaried individuals. Despite putting enormous burden on the salaried class, the FBR missed its annual collection target by a margin of around Rs1.2 trillion. The details showed that non-corporate sector employees paid Rs236.5 billion income tax in the last fiscal year, which is higher by Rs67 billion or 40%. Corporate sector employees paid Rs165 billion in income tax, also higher by Rs54.6 billion or 49%. Employees of the provincial governments paid Rs99.5 billion in taxes, which was up by Rs49 billion or 98%. The federal government employees paid Rs54.2 billion, higher by Rs17 billion or 45%. Total income tax payments during the last fiscal year were Rs5.8 trillion and the salaried class paid Rs1 out of every Rs10 collected from the entire country under the head of income tax. In contrast to Rs555 billion paid by the salaried persons, the retailers, mostly unregistered, have contributed only Rs38 billion on account of withholding income tax on their purchases. The amount of tax that traders paid under section 236-H was 1,360% less than taxes paid by salaried persons. Besides, wholesalers and distributors also paid Rs25 billion withholding tax in the last fiscal year and almost half of them were unregistered with the FBR, said the sources. PM Sharif could not live up to his promise of collecting due taxes from the retailers. The Tajir Dost scheme failed to yield desired results and the government has not announced any new measure in the budget to bring the retailers in the tax net. Its biggest enforcement measure to ban the economic transactions by ineligible persons has become effectively useless after the government exempted more than 90% transactions from the purview of the new law. The government has allowed the ineligible persons, those having not enough declared resources, to buy up to Rs7 million worth of a car, Rs50 million worth plot and Rs100 million commercial property. In the budget, the government had imposed 2.5% withholding tax on traders, in the hope that this would force them to come into the tax system. Though the increase in the rate did help collect Rs21 billion more from the traders, the intended objective could not be achieved. The traders passed on the cost of the additional tax to the end consumers. In the last budget, the government had also substantially increased the tax burden of the real estate sector by increasing the rates for the non-filers and also introducing a new category of late filers in the budget. As a result, during the last fiscal year, the government collected Rs237 billion on sales and purchase of properties. This helped increase collection by 19% compared to the previous fiscal year but it was still below the mark. The combined taxes paid by both retailers and the real estate sector were 100% less than the total contributions by the salaried persons. On the sale of properties, the government collected Rs119 billion on account of withholding taxes, which were one-fourth more than the preceding fiscal year. On the purchases of the plots, the government collected another Rs118 billion, also higher by 14%. In the new budget, the government has abolished the federal excise duty on the real estate sector. The net taxes on the sales and purchases remained unchanged, although the government shifted higher burden towards the sellers by increasing their withholding tax rates.
Time of India
26-04-2025
- Automotive
- Time of India
Mahindra to buy nearly 59% stake in SML Isuzu for Rs 555 crore at deep discount
Mahindra & Mahindra has agreed to acquire a 58.96% stake in commercial vehicle maker SML Isuzu Ltd for Rs555 crore, or at Rs650 a share, a massive discount to the company's last stock price of Rs1,766.70 on the BSE. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" Mahindra will acquire the entire 43.96% held by SML promoter Sumitomo Corporation and another 15% from Isuzu Motors Ltd, a public shareholder, the automaker said on Saturday. It will also make an open for at least a 26% stake at Rs 1,554.60 a share. SML had been looking for a buyer for the last couple of years. The proposed acquisition is a step towards establishing a strong presence in the 3.5-tonne-plus commercial vehicle segment, where M&M has a 3% market share, as compared to a 52% market share in the under 3.5-tonne light commercial vehicle segment, the company said. M&M's Trucks and Buses Division has made meaningful progress over the past few years, it said. This is M&M's second acquisition in the commercial vehicle business and the first major deal by the auto business since Anish Shah took charge as the group managing director and chief executive in 2021. Mahindra bought out the stake of US truck maker Navistar in their India joint venture in February 2013. The acquisition paved the way for the company's entry into the heavy-duty truck segment. 'The acquisition of SML Isuzu marks a significant milestone in Mahindra Group's vision of delivering 5x growth in our emerging businesses. This acquisition is aligned with our capital allocation strategy for investing in high-potential growth areas which have a strong right to win and have demonstrated operational excellence,' said Shah. Mahindra expects the acquisition to double its market share to 6%, with a plan to increase this to 10-12% by FY31 and 20%+ by FY36, the company said. Incorporated in 1983, SML Isuzu has a pan-India presence in the trucks and buses segment, it said. SML has a market share of 16% in the intermediate light commercial vehicle bus segment. It reported operating revenue of Rs2,196 crore and Ebitda of Rs179 crore in FY24. "It has profitable operations, frugal manufacturing and strong engineering capabilities," Mahindra said. In the nine months ended on December 31, 2024, SML's revenue from operations increased to Rs1,627 crore from Rs1,516.33 crore a year earlier. SML offers significant potential to unlock value through synergies in cost, network, brand, manufacturing, talent and product complementarities, Mahindra said. "Our trucks and buses business has developed strengths by tapping into technology, design & innovation, and sourcing from our auto business. Together, this would be a powerful combination,' Mahindra said. This acquisition is a pivotal step toward our ambition to become a full-range, formidable player in commercial vehicles by enhancing market coverage, unlocking operating leverage through platform consolidation, a unified supplier and network base, and better plant utilization. Together, we are well-positioned to scale rapidly and drive profitable growth,' said Rajesh Jejurikar, executive director, Auto and Farm Sector, at the firm. Kotak Investment Banking is acting as the financial advisor to M&M and manager to the open offer. Khaitan & Co acted as legal advisor to M&M.
