All chambers of commerce and industry and trade associations across the country have unanimously urged the government to reduce direct and indirect tax rates in the forthcoming budget, besides implementing drastic changes in tax policy of the country to bring new taxpayers into the net and narrow the budget deficit.
The chambers and trade associations, in their joint budget proposals for Fiscal Year 2014-15, asked the Federal Board of Revenue (FBR) to bring in new taxpayers, which will consequently broaden the tax to GDP ratio and narrow the budget deficit so that the country no longer needs and depends on foreign and domestic borrowing.
All Chambers of Commerce and trade associations in all five provinces of Pakistan united under one roof at 1st All Pakistan Chambers’ Pre-Budget Conference organized by Karachi Chamber in the month of February 2014 in which all Chambers’ Presidents agreed to formulate a comprehensive document carrying joint budget proposals of various chambers.
KCCI, under the supervision of its President Abdullah Zaki, Senior Vice President Muffasar A Malik, Vice President Muhammad Idrees, Budget Committee Chairman Qamar Usman and KCC Taxation Sub Committee Chairman Hassan Sheikh Vohra, compiled budget proposals of all chambers of commerce on independent and equitable basis, which were thoroughly examined and finalised by presidents of all chambers at 2nd All Pakistan Chambers’ Presidents Pre-Budget seminar organized by Faisalabad Chamber in the month of April 2014. All Chambers’ Budget proposals have been sent to the policymakers so that a pro-business budget is unveiled this year as per aspirations of the entire business community of Pakistan.
According to joint budget proposals, taxpayers expect from the FBR, a level of service that they receive from the very best of the private sector and multinational service industry. The taxpayer service delivery function nowadays plays a crucial role in the administration of the tax legislation in all countries. Prevailing services that are user-friendly, in the sense of being accessible and understandable for all, helps to maintain and strengthen the taxpayers’ willingness to comply voluntarily and thereby contribute to improvement in overall levels of compliance with the laws.
No amount of effort will generate or improve the tax revenue collection, until and unless all incomes above the minimum threshold of Rs400,000 are taxed, irrespective of the source. Currently, huge incomes from agriculture, professional services sector and influential remain untaxed. Firm steps are needed to recover the tax from all these areas.
Agriculture income is a convenient means to conceal income generated from all other sources, for the documentation and taxation, income from every segment including agriculture should be taxed, NTN must be mandatory for all sectors and they should be asked to file income tax returns.
In the last few years, Industry and Trade in the private sector has suffered setbacks because of the high cost of doing business mainly due to industrial inputs including raw materials, gas, electricity, manpower and high cost of working capital, which has made life difficult for many industries to survive and run profitably.
Joint Budget Proposals document recommends revising tariff for industrial undertakings. It should be reviewed and brought down and fixed at least for 1 year.
At import stage the accumulative sum of all taxes (including sales tax and income tax), customs and regulatory duties and levies should not anyhow exceed 30 percent of the value of goods. While, the raw materials and machinery should be in a slab of 5 percent with zero rating on raw material used in exports.
Since 65 percent of the sales tax collection and revenue is collected at import stage, it has become a fixed tax and levy instead of value addition tax, increasing the incidence of under invoicing and smuggling by some unscrupulous elements. As total incidence of customs duty, sales tax, income tax, FED and regulatory duty could sometime go as high as 70-80 percent of the value of import in certain cases.
Customs duty slabs should be simplified with 4 slabs of zero percent, 5 percent, 10 percent and maximum 15 percent.
Rates of GST and Income Tax be brought down to a maximum of 12.5 percent (inclusive of value addition tax) and 30 percent for corporate and 20 percent for small companies having turnover of Rs 1.0 billion respectively. This will provide relief to trade and industry and gradually to be brought down to single digit for sales tax and 25% for corporate income tax, respectively. Moreover, rate of 5 percent sales tax for life savings and essential goods, and good which are smuggling prone.
A special fund of Rs 50 billion should be created in the upcoming budget to provide timely refunds to the exporters of Pakistan who are earning precious foreign exchange revenue to the national exchequer.