Dar urged to roll back changes in Fi­nance Bill for hold­ing companies

Pakistan Observer - - ECONOMY WATCH - STAFF RE­PORTER

KARACHI—In a re­cent let­ter to Ishaq Dar, Min­is­ter of Fi­nance, Rev­enue & Eco­nomic Af­fairs, Pres­i­dent & CEO En­gro Cor­po­ra­tion, Khalid Siraj Sub­hani has urged the min­is­ter to with­draw the pro­posed amend­ments in the Fi­nance Bill 2016 in re­spect of tax­a­tion of in­ter-corporate div­i­dends and sur­ren­der of losses un­der Group Re­lief.

Through the fi­nance bill 2016, the ex­emp­tion from tax for in­ter-corporate div­i­dends in a group struc­ture, pre­scribed un­der sec­tion 59B of the In­come Tax Or­di­nance, 2001, is pro­posed to be abol­ished. It has also been pro­posed to add a re­stric­tion in sec­tion 59B whereby the sur­ren­der of losses un­der Group Re­lief will be restricted to the per­cent­age hold­ing of the hold­ing com­pany in the en­tity sur­ren­der­ing the losses.

While ex­tend­ing his ap­pre­ci­a­tion to the Gov­ern­ment and other bod­ies which in­tro­duced the con­cept of Group Tax­a­tion in 2007to fos­ter cor­po­ra­ti­za­tion and con­sor­tium re­lief, Pres­i­dent & CEO En­gro Cor­po­ra­tion fur­ther stressed the need for keep­ing the pol­icy in place and with­draw­ing the pro­posed amend­ments. Through Group Tax­a­tion, En­gro Cor­po­ra­tion has been­able to nur­ture its sub­sidiaries and of­fer them in the cap­i­tal mar­kets of the coun­try, rais­ing the liq­uid­ity, mar­ket cap­i­tal­iza­tion and turnover as well as giv­ing the com­mon man the op­por­tu­nity to in­vest and ben­e­fit from well gov­erned and reg­u­lated busi­nesses.

The with­drawal of ex­emp­tion for in­ter-corporate div­i­dends will re­sult in in­ci­dence of dou­ble (at times, triple) tax­a­tion on in­ter-corporate div­i­dends. Fur­ther, one of the ma­jor con­di­tions for sur­ren­der of losses un­der group re­lief is the main­te­nance of sub­stan­tial in­ter­est or con­trol in the sub­sidiary com­pany by the hold­ing com­pany.

It is an in­ter­na­tion­ally ac­cepted prin­ci­ple that with con­trol, an en­tity as­sumes the right to gov­ern all the as­sets and li­a­bil­i­ties of another en­tity in their en­tirety, in­clud­ing losses. To im­pose a lim­i­ta­tion on the right of the hold­ing com­pany to uti­lize such losses (based on hold­ing per­cent­age) would not only be eco­nom­i­cally un­just but would also be against the con­cept of group tax­a­tion un­der in­ter­na­tion­ally ac­cepted norms.

En­gro Cor­po­ra­tion has also made and con­tin­ues to make sig­nif­i­cant in­vest­ments in en­ergy projects un­der CPEC. The cur­rent En­gro group struc­ture has been de­signed to de­liver on the Group’s strat­egy on in­vest­ments on the back of ex­ist­ing leg­is­la­tion. The pro­posed amend­ments in the Fi­nance Bill would ne­ces­si­tate En­gro Cor­po­ra­tion to re­think its cur­rent and fu­ture in­vest­ments.

It is per­ti­nent to men­tion that Pak­istan Busi­ness Coun­cil and Over­seas In­vestors Cham­ber of Com­merce and In­dus­try have also rec­om­mended to with­draw these pro­pos­als from the Fi­nance Bill, in their re­spec­tive let­ters to the Fi­nance Min­is­ter. huge funds for com­ple­tion of West­ern route of China Pak­istan Eco­nomic Cor­ri­dor (CPEC).

In a state­ment, he said up to 22 bil­lion ru­pees have

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