The Punjab government has finally dropped the proposal to jack up taxes on all luxury clubs in contrast to a new financial policy based on tightening the belt around the wealthy class to lessen financial woes, Pakistan Today has learnt.
Luxury clubs included the Lahore Gymkhana Club, Royal Palm Golf and Country Club, Punjab Club, Sukh Chain Club, Model Town Club and The Oasis. The Defence Club and Civil Services Club are controlled by the Defence Ministry and not the Punjab government. Punjab Excise and Taxation Department officials hinted at collecting around Rs 200 million from increasing the tax on luxury clubs but financial wizards turned down the proposal terming it undoable, a senior official in the CM’s Secretariat told Pakistan Today.
The Punjab CM had dreamed a new self-reliance policy by discouraging US grants and improving revenue by imposing viable taxes on the rich. He sought consultation from think tanks, bureaucrats and policy makers on imposing manifold tax on luxury clubs. The CM also constituted a committee headed by his Senior Advisor Zulfiqar Khosa in this regard. According to sources, proposals in this regard remained a part of marathon discussions and meetings held at the CM’s Secretariat during the last 15 days. All provincial secretaries, Pakistan Muslim League-Nawaz (PML-N) legislators and leaders brainstormed on various suggestions including levying tax on luxury clubs.
In the beginning, they agreed to burden well-off people, sources said but the agreement turned into disagreement when the participants apprised the CM that most of the bureaucrats and PML-N leaders were directly or indirectly main beneficiaries of such luxury clubs and imposition of any lax would plunge the government into serious trouble.
On being contacted, excise and taxation department official Khawaja Shamaiyal said that now there was no proposal to tax luxury clubs. Punjab Excise and Taxation Department Deputy Secretary (Technical) Imran Aslam said that as there was no rationale to impose tax on luxury clubs, the department recommended dropping the proposal. “We were asked to identify untapped areas to generate revenue. We pleaded that entertainment tax could not be levied because it was taken on those clubs which held functions and sold entry tickets. Professional tax was imposed on those sectors engaged in production and manufacturing areas,” he explained. Aslam said that property tax was already imposed and all luxury clubs were paying them regularly.
Data revealed that among others, the Lahore Gymkhana Club pays Rs 14.5 million, Royal Palm Club Rs 9.74 million and Punjab Club pays Rs 0.5 million in taxes annually. An official of the Regional Tax Office said that private luxury clubs were involved in offering food to customers in posh areas without payment of due amount of sales tax to the exchequer. He said that private luxury clubs were also engaged in extending commercial services to VVIPs and offering luxury facilities such as food on marriages.
”Some of the clubs are not paying the due amount of sales tax and are non-compliant to sales tax audit. The RTO Lahore planned to deploy sales tax officials at the premises of these clubs without discrimination, but all in vain. If luxury clubs dealing with VVIPs are not paying sales tax, Section 40-B of the Sales Tax Act would be exercised in these cases as well. Private clubs, engaged in offering food, are also covered under this criterion for posting of sales tax officials under Section 40-B of the Sales Tax Act.
According to sources, it has been observed that many restaurants charge tax from customers but did not reflect the sales invoices in their returns. The massive evasion of sales tax by private clubs and hotels in Lahore was evident from the fact that restaurants in posh areas such as MM Alam Road, Defence and private clubs were showing their sales less than Rs 10,000 daily.
