The Institute of Chartered Accountants, Pakistan (ICAP), in its budget proposal, has given a roadmap for broadening the tax base, facilitating the already registered taxpayers, abolishing tax amnesty schemes and improving governance in the Federal Board of Revenue (FBR).
A pre-budget seminar was organised by ICAP in Karachi. FBR Large Taxpayer Unit, Karachi Chief Commissioner (Inland Revenue) Syed Ayaz Mehmood was the chief guest on the occasion.
With reference to direct taxation, ICAP Taxation Committee Member Asif Haroon said that the ICAP has recommended that the tax policy board should play its role in formulating the fiscal policy as a support to legislative function; and act as an oversight over the performance of the FBR. Only the minister for planning from the cabinet should be the member of the Board whereas the rest of the board should consist of representatives of major stakeholders including the FPCCI, economists and ICAP etc.
It was suggested that the tax structure should be reformed to ensure that there is no multiple taxation by the province and the federal government.
While talking about policy reforms in the appellate forum, Asif Haroon said: “Appeals should be brought under the administrative control of Federal Ministry of Law and the Appellate Tribunal under the control of the high court of the respective jurisdiction. No recovery of tax demand should be created till the decision of the commissioner of appeals while officers of the tax department should not be appointed as judicial members of the Appellate Tribunal. For policy reforms in governance, there should be speedy process of registration, particularly for non-residents as well as a speedy process for application of condonations.”
He said the government should make a policy which discourages high handedness of the tax officer; exorbitant demands and coercive measures of recovery. In addition, excess taxes paid should be promptly refunded and amnesty schemes for non-compliant should be stopped. “The tax officer should be made accountable if orders do not stand the test of appeals,” he said.
“In order to broaden the tax base, industrial consumers of electricity and gas who are un-registered must be identified. Withholding tax on natural gas consumption by industrial and commercial consumers should be introduced. Identification of unregistered wholesalers and retailers, service providers and real estate dealers and developers should be carried out in liaison with provincial governments who actually possess physical and business data of these sectors,” he added.
Likewise, the state should utilise data of tax withholdings (including ST withholding) of unregistered people or non-filers to register them.
“Permanent tax evasion and amnesty scheme provided under Section 111(4), if cannot be abolished, should be made conditional i.e., it should be restricted to remittances by an overseas non-resident Pakistani to a relative with monetary limits and for the purpose of investment in an industrial undertaking in Pakistan,” he added.
He further added: “Under-invoicing should be tackled on emergency basis. Tax credit under section 65A available to manufacturers may be extended to other persons as well and tax credit should also be given on purchases if these are made from registered suppliers or service providers. Corporate tax rate needs to be reduced to 25 per cent in line with the rate applicable in the region. Tax on bonus shares should be abolished as the shareholder does not derive any income from the receipt of bonus shares. Tax credit of 20 per cent should be also allowed in two years after the year of enlistment. Corporate tax rate for banks of 35 per cent should be brought at par with corporate tax rate applicable to other companies to ensure a level playing field.”
Asif Haroon recommended that Dual Taxation should be avoided. Withholding tax on indirect taxes should be abolished. There should be a single indirect return with identification of federal and provincial head of account and direct deposit of share of tax of each province. Haroon said there should be a directorate of audit with representation from each province and the FBR.
Talking about standard tax rate reduction, ICAP Taxation Committee Member Asif S. Kasbati said: “Lower tax rate will promote registration and documentation.” In order to promote registration and dealing with the registered sector, he recommended that extra incentives should be offered to registered persons or if they deal with a registered person. The incentive may be in the shape of fixed or variable tax credit(s) at the end of the year, as is the case in the IT Law.
Chal gai churi ? But not to worry. The tax base will never increase and the common man will keep suffering. Bring back those US$ 200 bn of Pakistanis in Swiss Bank – all black money. It was publicly admitted by the Finance Minister.
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