No new tax in federal budget: Dr Pasha

0
195

Federal Budget 2011-12 will focus on equity, revival and self reliance. The government has decided not to impose any new levies or raise the rates of existing taxes and Wealth Tax will be substituted with asset-based minimum alternative tax of one percent. Reformed General Sales Tax (RGST) cannot be enforced in a haphazard manner. It was revealed by the Revenue Advisory Council (RAC) Chairman and former Federal Finance Minister Dr Hafeez A Pasha, while addressing members of Institute of Chartered Accountants of Pakistan (ICAP) at a Pre-Budget Seminar held here on Saturday. It had been learnt from a bid to impose RGST, Dr Pasha pointed out that the tax system in the country was fundamentally unfair.
People had fed up from the taxation system and had strong reservations over the usage of the tax money. He said mismanagement, corruption and bad governance were the hallmark tax machinery. “I see tax revolt in the country as tax compliance is dropping rapidly,” he added. He agreed that the past experience of imposing Wealth Tax was not really a success, but it was being introduced for overall compliance. It was under serious consideration that the focus of the Wealth Tax would be shifted to assets. , However, if two or more provinces successfully enhance presumptive rates and property tax, alternative minimum tax might be withdrawn. And if provinces failed and the Constitution allowed the government had to shift on alternative minimum tax, he underlined.
Dr Pasha said that under the 7th National Finance Commission (NFC) award provinces were autonomous to collect taxes on agriculture, services and property. Thus the forthcoming budget would focus on the provincial taxation and capacity building of the provincial tax machinery related to enforcement and compliance. Speaking about the buzz words agriculture income tax, Dr Pasha underlined research had suggested that the overall potential of agriculture income tax was around Rs 42 to Rs 45 billion, which was around 0.25 percent of the GDP. However, after the passage of 18th Constitutional Amendment now the provinces had all autonomy and revenue collections would be based on the fiscal policies of the provincial governments.
He pointed out that earlier the provinces had been maintaining the positive lists, but now it had been principally decided to maintain a negative list of tax purposes, which means that few social sectors like health and education would be exempted, while the rest of the economy would be brought under tax net. He underlined that the culture of tax evasion and under payment had deeply penetrated in the society. Numbers of non-filers and under-payments were alarmingly high. However, through Resource Mobilisation Strategy and data cross-matching with third party sources, the FBR had identified some 700,000 non-filers and the first tax payment of Rs 700,000 had been recovered from a non-filer.
He also pointed out that there was a substantial amount of under-payment from Withholding Tax agents.
Dr Pasha revealed that a special package was being introduced for capital market development and some tax measures for banking industry were under strong consideration. He also disclosed that agriculture produce agent would also be brought under tax net. However, the government did not want to put the salaried individual under more pressure, so there was no question raising tax rate for salaried class. Commenting on the budget proposals of the ICAP, Dr Pasha said that though it was a good option to impose Withholding Tax (WHT) on industrial usage of gas, but the government had principle stand not to impose new taxes.
However, gas prices would be increased for better utilisation of this scarce resource, he added. He said that the government did not want to discourage remittance and there was no proposal to tax foreign remittances. The country had bitter experience of doing that in Bhutto’s regime, when it had to withdraw the tax on remittances after two days of imposition. Dr Pasha underscored that the country had taken a strong hit owing to heavy flooding. Economic growth will be around 2.5 percent and manufacturing sector will witness one percent growth, which will be 4-year low, he said and added that in these circumstance the country had to maintain its dignity and peruse the power of self reliance.
He said though the government was heading towards the right direction, but could not say anything about the success of the whole exercise as the elections were looming in. Speaking on the occasion, former FBR Secretary General Abdullah Yousaf underlined that there was a dire need to mobilise revenue and rationalise expenses. He pointed out that the debt liability of Pakistan of the country was touching Rs 11 trillion. The country had to spend Rs 900 billion for debt servicing and Rs 650 on defence, which some Rs 350 billion would go in subsidies and losses. In these circumstance to focus on the development the government had to revisit it policies. Others who spoke on the occasion, include ICAP President Sheikh Saqib Masood and NRC Chairman Faisal Iqbal Khawaja.