PCDMA Submits Budget Proposals to FBR for Taxpayer Relief

The Pakistan Chemicals & Dyes Merchants Association (PCDMA) has presented its budget recommendations to the Federal Board of Revenue (FBR), aiming to ease the burden on taxpayers and foster a more trusting relationship between businesses and tax authorities.

PCDMA Chairman Salim Valimuhammad emphasized the growing compliance challenges faced by taxpayers, noting that extensive paperwork and frequent audits are discouraging participation in the formal economy. Umair Tariq headed the budget proposal committee.

The PCDMA chief highlighted that while many taxpayers are willing to comply, they struggle due to limited technical understanding and the strict behavior of tax officials. The association advocated for a more supportive and educational strategy from the FBR to promote voluntary compliance.

Concerns were also raised regarding audits under Section 165 related to withholding tax returns. Given that withholding agents already handle tax collection, additional audits create unnecessary strain. The association suggested discontinuing these audits to alleviate the burden on businesses.

A key issue in the proposals was the difficulty families encounter in continuing businesses after the death of a sole proprietor. Current laws require a completely new registration process. The PCDMA suggested allowing a family member to be added as a representative in the deceased’s IRIS profile to ensure business continuity.

Salim Vali Muhammad urged the revival of the Final Tax Regime (FTR) for commercial importers. The PCDMA noted that even though commercial importers are paying the Additional Sales Tax (Value Addition Tax), the previously granted audit exemption has been revoked without justification. The association demanded either the reinstatement of audit immunity or the removal of the additional tax.

He also requested the government to provide relief under Section 8B by restoring the previous facility for commercial importers. If immediate restoration is not feasible, they suggested that at least 95% of output tax should be adjustable, with only 5% payable to address liquidity concerns.

To address the issue of fraudulent invoices, the association proposed lowering the Further Tax rate from 4% to 1%, making compliance easier for legitimate businesses. They also recommended a phased reduction in the general sales tax (GST) rate, starting with a cut to 16%, aiming for single-digit rates in the long term.

Regarding local supplies, the association suggested reducing the withholding tax rate on raw materials to 2% for companies and 2.5% for individuals, believing this would encourage formalization and improve documentation.

The PCDMA strongly recommended discontinuing the Export Facilitation Scheme (EFS), arguing that it has primarily benefited those exploiting the system to evade taxes under the guise of exporting goods. The association stressed that such schemes are unsuitable for Pakistan’s current economic environment, where weak enforcement and widespread pilferage are significant issues.

The EFS has not only failed to achieve its objectives but has also created problems for genuine importers while enabling non-taxpayer actors to thrive. The association urged the government to focus on improving and expediting the standard refund system to support legitimate exporters without enabling tax evasion.

The PCDMA also expressed concerns about unequal treatment between commercial and industrial importers under Section 148 of the Income Tax Ordinance. The current higher tax rates for commercial importers were deemed unjustified, particularly since many manufacturers misuse their status to import goods for local sale. The association called for an end to this disparity or the reinstatement of the FTR if the higher rates are to continue.

Salim proposed streamlining customs duties under PCT 32.04, suggesting a flat rate of 5% to eliminate under-invoicing and prevent revenue losses. It also demanded the abolishment of the Rs 500 WeBOC token fee, arguing that importers are now paying an equivalent PSW fee and should not be charged twice.

The PCDMA recommended capping customs duties on raw materials, such as chemicals and dyes, at 5%, arguing that the current higher rates—up to 20%—along with additional customs duties, are detrimental to business and should be eliminated.

These proposals highlight the business community’s desire for a fairer, more efficient tax system and the need for reforms to rebuild confidence and promote economic growth.