Govt urged to restore group tax facility

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Govt urged to restore group tax facility

May 9, 2018

Karachi: Pakistan Chemical Manufacturers Association (PCMA) Senior Vice President Zafar Mahmood has said that the process of corporatization would badly be discouraged if the government did not restore group tax facility under Section 59B along with clause (103A) of the Income Tax Ordinance, 2001.

In a press statement issued here Tuesday, he strongly demanded that group tax relief, before the final approval of the federal budget, should be revived.

Zafar told that the Government had introduced the concept of group taxation and group relief to promote corporatization and group formation, allowing the corporate entities to grow into conglomerates. For this purpose, section 59B along with clause (103A) of the Income Tax Ordinance, 2001 regarding group relief have remained active till announcement of the current federal budget, he said.

He added that under this facility, a company owning 55% or more of a subsidiary company was to pay tax on dividend received from the subsidiary at the time of distribution to ultimate shareholders, thus curbing the chances of double taxation on dividend.

He acknowledged that the facility was adopted by the Government in line with best international practices to promote corporatization in the country, as a result of which a number of industrial groups had formed the group structures.

But, to surprise of the industry, the said Section 59B that deals with the group relief, has been omitted and benefit of exemption of inter-corporate dividend has been withdrawn, Zafar lamented and informed that the situation has forced the large industrial groups to pay double tax on dividend in case of one subsidiary and triple tax on dividends in case of dividend received from the subsidiary of a subsidiary.

This unilateral action by the Government, without taking the stakeholders on board, has severely hurt the concept of corporatization in the country, although the industry had remained in contact with the Government for re-instatement of the facility for last 2 years, he said.

It was expected that finance minister Miftah Ismail, who is also from the business community, would address this issue in the current budget but the same did not materialize again, he lamented and demanded restoration of Section 59B along with clause (103A) of the Income Tax Ordinance, 2001 regarding group relief in the final approval of budget for the encouragement of the corporatization in the country.

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