April 8, 2003	Tuesday	Safar 5, 1424

KARACHI, April 7: Tax consultants and experts have asked the government to lower sales tax rate to 10 per cent and should also strive to broaden the tax base by bringing all category of incomes, including agriculture under the tax net.

These demands and suggestions were put forward by speakers at a “Pre-Budget Seminar,” organized by the Income Tax Bar Association, Karachi (ITBAK) held in the conference hall of Income Tax building, here on Monday.

Though there was strong demand for bringing in various amendments and changes in the Income Tax Rules 2002, removal of errors in the Income Tax Ordinance 2001, as well as a number of proposals were made for the budget 2003-2004, but there was consensus over the issue of broadening of tax base and cutting down tax rates.

Speakers pointed out that without broadening tax base the government could not think of lowering of tax rates, therefore, it was imperative to include all category of incomes under the tax net.

Former president of ITBAK Abdul Qadir Memon said that taxes must be equitable and fair between different classes of society. All the segments of the society including agriculturists should be brought in the tax net, he demanded.

He further said that the present tax system was inequitable as it was a known fact that a very big segment of highly placed people was owning enormous wealth, lucrative occupations and enjoy luxurious living but still they were paying no tax or much lower than those who belong to fixed income groups such as salaried class.

But it was unfortunate, he said that even the Income Tax Ordinance, 2001 did not remove this mockery of law which allows ‘rich to become richer and poor are being pushed below poverty line.’ It is an admitted fact that agriculture was by far the largest sector of the national economy but continues to be out of tax net, he added.

The industrial sector, he said contributes 18 per cent of the GDP in comparison to agriculture, which shares 25 per cent of the GDP. But the income tax collection of Rs125 billion is only shared by trade, industry and the salaried class.

Abdul Qadir Memon said that assessing the income from four main crops — cotton, rice, sugarcane and wheat — may not be that difficult because these are generally sold to registered dealers whether they are ginners, millers, crushers or arthis. Therefore, their receipts should be considered authentic documents and assessees should be encouraged to obtain them and submit them with their returns, he maintained.

Another speaker Farrukh V. Junaidy while suggesting budget proposals at macro level said that in a developing country where economy was not thoroughly documented and with an inflationary trend, 15 per cent rate of tax was too high. He proposed that besides broadening the tax net the rate of tax should also be brought down.

He was critical about the present taxation system and said that it allowed certain categories of persons to enjoy reduced rates by remaining in turnover tax regime of sales tax and others to pay high rate. This was one of the major hindrances in development of sales tax besides constructing to cascading and created extortion in the system. Junaidy felt that turnover tax regime should be abolished immediately.

Junaidy who at length dealt with Sales Tax further said that the presence of third schedule was contrary to the very concept of VAT which required the manufacturers to charge sales tax at the retail price. The chain of supply once the goods leave the manufacturing premises remain outside the tax net. In order to bring the entire chain of supply in the tax net and encourage documentation, he said the third schedule should be abolished.

It is ironic, he said the taxpayer was subjected to all sorts of penal actions by the authorities even in case of inadvertent error on his part. However, the law does not provide for any penal action for the authorities when they resort to arbitrary manner of assessment or collection of tax.

A senior tax consultant, E U Khawaja who chaired the seminar while summing up the proceedings said that the Income Tax Ordinance 2001, was framed with the assistance and guidance of the IMF and all care was taken to keep it free from provisos to ensure that the document stay simple. But unfortunately, the authorities last year, he said, made a number of amendments and changes in the ordinance and were expected to resort to further amendments in the coming budget by bringing in changes number up to 100 to 125.