Business Recorder
ISLAMABAD (July 19 2010): All Pakistan Oil Tankers Contractors Association has expressed its inability to continue their business due to heavy documentation like book keeping, return filing etc under the Finance Act 2010 on daily basis through legal banking channels.
Giving details of his presentation to the Ministry of Finance and Federal Board of Revenue (FBR), Ainullah Agha Chairman of contractors association told Business Recorder here on Sunday that such documentation is not possible in a business where illiterate persons are involved in the whole supply chain. It is unrealistic to deal with all the documentation with the withholding agents under the category of 'transport services'.
If the government is not ready to accept the ground realities of the persons covered under the category of transport services, it would be responsible for total closure of the business of oil tankers owners and concerned contractors.
The contractors of the industry have been engaged in payment of 2 percent withholding tax on gross turnover, which is final discharge of tax liability. The contractors are not legally bound to pay any other tax apart from final tax liability. The 2 percent withholding tax has been declared as 'minimum tax' on the transport services which has restricted the contractors to maintain documentation and regularly file their income tax returns and ensure deduction of withholding tax on making payments for purchase of tyres, spare parts and other items.
Heavy documentation for the contractors included maintaining record of cash book, bank books, ledgers, names and particulars of the parties dealing with the contractors and ID card copies of all persons involved in business.
In line with the provisions regarding withholding liability in case of companies and AOPs, an individual with turnover of Rs 50 million or above is also to be designated as "prescribed person" under sub-section (9) of section 153. Such individual shall be responsible to act as withholding agent. It is therefore, proposed that an individual with turnover of Rs 50 million or above is to be added in the list of "prescribed person" under sub-section (9) of section 153.
Taking into account the new law, the said contractors have to operate as withholding agents which is not possible as most of the persons engaged in this business are not literate. The FBR has also made mandatory for the contractors to make payments through cross cheques and maintain complete record of persons to whom payments have been made.
Ainullah Agha further said that when the contractors tried to convince the containers' owners to maintain documents and carry out documented transactions, they simply refused to operate under the documented regime.
It is further complicating to file income tax returns electronically by the business sector where 95 percent of the people are illiterate particularly drivers engaged in taking such products like oil etc. It is not possible to operate as withholding agent after amendment in section 153 of the Income Tax Ordinance, 2001. Being a withholding agent we have to make payment through cheques and deduct the withholding tax on making payments on purchase of spare parts, hiring of vehicles and making cash payments to drivers for purchase of diesel etc. To operate under the documented regime, everybody with whom we are doing business should have bank account for deduction of withholding tax.
Chairman contractors association said practically they can not operate as withholding agent despite the fact that they are covered under the category of individual taxpayer with annual turnover of Rs 50 million. The new tax is an addition to various federal and provincial taxes paid by them and the new tax is causing financial damage to the oil transport sector.
-www.brecorder.com
Giving details of his presentation to the Ministry of Finance and Federal Board of Revenue (FBR), Ainullah Agha Chairman of contractors association told Business Recorder here on Sunday that such documentation is not possible in a business where illiterate persons are involved in the whole supply chain. It is unrealistic to deal with all the documentation with the withholding agents under the category of 'transport services'.
If the government is not ready to accept the ground realities of the persons covered under the category of transport services, it would be responsible for total closure of the business of oil tankers owners and concerned contractors.
The contractors of the industry have been engaged in payment of 2 percent withholding tax on gross turnover, which is final discharge of tax liability. The contractors are not legally bound to pay any other tax apart from final tax liability. The 2 percent withholding tax has been declared as 'minimum tax' on the transport services which has restricted the contractors to maintain documentation and regularly file their income tax returns and ensure deduction of withholding tax on making payments for purchase of tyres, spare parts and other items.
Heavy documentation for the contractors included maintaining record of cash book, bank books, ledgers, names and particulars of the parties dealing with the contractors and ID card copies of all persons involved in business.
In line with the provisions regarding withholding liability in case of companies and AOPs, an individual with turnover of Rs 50 million or above is also to be designated as "prescribed person" under sub-section (9) of section 153. Such individual shall be responsible to act as withholding agent. It is therefore, proposed that an individual with turnover of Rs 50 million or above is to be added in the list of "prescribed person" under sub-section (9) of section 153.
Taking into account the new law, the said contractors have to operate as withholding agents which is not possible as most of the persons engaged in this business are not literate. The FBR has also made mandatory for the contractors to make payments through cross cheques and maintain complete record of persons to whom payments have been made.
Ainullah Agha further said that when the contractors tried to convince the containers' owners to maintain documents and carry out documented transactions, they simply refused to operate under the documented regime.
It is further complicating to file income tax returns electronically by the business sector where 95 percent of the people are illiterate particularly drivers engaged in taking such products like oil etc. It is not possible to operate as withholding agent after amendment in section 153 of the Income Tax Ordinance, 2001. Being a withholding agent we have to make payment through cheques and deduct the withholding tax on making payments on purchase of spare parts, hiring of vehicles and making cash payments to drivers for purchase of diesel etc. To operate under the documented regime, everybody with whom we are doing business should have bank account for deduction of withholding tax.
Chairman contractors association said practically they can not operate as withholding agent despite the fact that they are covered under the category of individual taxpayer with annual turnover of Rs 50 million. The new tax is an addition to various federal and provincial taxes paid by them and the new tax is causing financial damage to the oil transport sector.
-www.brecorder.com
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