SMEs for proper tax mechanism

LAHORE –– The Union of Small and Medium Enterprises (UNISAME) invited the attention of Dr Abdul Hafeez Shaikh federal finance minister to the misconception about SMEs not willing to pay taxes and reiterated that SMEs are willing to pay taxes and are paying taxes regularly and properly as per law which is evident from the revenues collected from SMEs but insist on proper practical working mechanism.

President UNISAME Zulfikar Thaver said the SMEs believe that they like others have to pay taxes and it is the right of the government to collect and recover taxes but the system of tax collection and payment must be simple and not cumbersome.

He pointed out that the Federal Board of Revenue (FBR) has imposed the role of withholding tax agent on the SMEs and has made the SMEs liable to collect withholding tax from their suppliers and deposit the tax in the treasury which is beyond the scope of the SMEs as they would have to keep additional staff for this purpose and secondly the state cannot compel a SME to render services as a withholding agent compulsorily without the SME offering voluntarily to do so out of his or her own free will under the constitution of the Islamic Republic of Pakistan.

Another pertinent point is that FBR has failed to comprehend the SME definition in the SME policy which defines a SME as one whose turnover is upto or below Rs 300 millions and in total disregard to this definition the FBR has exempted SMEs from the collection of withholding tax whose turnover is only upto 50 millions he complained.

This system of becoming withholding tax agents is making the SMEs very uncomfortable and they have suggested that they are willing to provide the particulars of their suppliers but the deduction of the withholding tax from the invoice of the supplier and then depositing it in the treasury is difficult and they should be spared this botheration he said.

The SME exporters have urged the government to remove this burden of acting as withholding agent and if necessary the government may increase the withholding tax on the SMEs themselves and in fact the government will generate more revenue in this manner rather than compelling the SMEs to become withholding tax agents and put them to the exercise which is time consuming and involving chances of corruption.

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