Amendment procedure needs to be improved: Income tax laws
By Our Staff Reporter
KARACHI, April 26: In civilized societies proposed amendments in the tax laws are made public at least six months before promulgation so that they could be debated in the general public and by the legislators.
On the contrary, tax administration in our country comes up with a large number of amendments in the form of a Finance Bill every year giving no time to taxpayers to plan their tax matters.
This was stated by Dr Ikramul Haq, a tax expert and author of several books on tax and revenues at the pre-budget seminar 2004 organized by the Income Tax Bar Association, Karachi (ITBAK) and was chaired by him at the conference room of Tax Bar on Monday.
Legitimate reduction of tax dues, he said, should be part of tax education as is the case in all civilized societies where tax administrations post their proposed amendments on websites at least six months before their promulgation giving a chance to taxpayers to plan their tax matters.
"In our country, the CBR clarifies retrospectively and prospectively of amendments after adoption of Finance Act which is an unprecedented transgression of powers by an executive authority," he said.
He said that every year taxpayers have an avalanche of amendments in the form of a Finance Bill. For the common man it is impossible to comprehend such frequent changes in the tax statutes.
Dr Ikramul Haq said that simplification of tax laws means plugging of the loopholes in the legislation rather than experimenting unnecessarily with new but worthless ideas every year. Ambiguity in the enactment brings uncertainties and increases litigation, therefore, uniformity of laws should be ensured, he suggested.
Referring to the new Income Tax Ordinance 2001, he said that it was promulgated with tall claims of bringing a simple document but it has turned out to be a more complex one vulnerable to increased litigation.
He said that Section 122 of the Ordinance alone provides unbridled, unfettered and uncontrolled powers to the tax department which are violative of Article 4 of the Constitution.
The tax expert cautioned that absolute powers given under such sections are bound to corrupt absolutely and added that this is a classic piece of legislation showing how a faulty tax system increases tax burden of the existing taxpayers and leaves non-filers unaffected.
Present tax laws and their administrators, he said, encourage tax evasion thus increasing tax burden on the honest taxpayers. In these circumstances, he said it was the duty of every citizen of the country in general, and tax professionals in particular to help in minimizing tax evasion in public interest.
The tax consultants, he said have a greater responsibility towards the society and added that it should be their endeavour to help the state to bring more people in the tax net and at the same time extend the best possible professional advice to their clients to reduce tax litigation.
He further said that efforts of the tax professionals should not be focussed on finding loopholes in the statute but to protect harmonious construction of the provisions with a view to encouraging tax planning which is a legitimate right of every citizen.
Earlier, experts read their papers suggesting wide range of amendments in sales tax laws and income tax. Majid Khandwala stressed upon the need to reduce sales tax rate from 15 per cent to 10 per cent and said only then more people will be encouraged to register in the sales tax.
He said that further tax at the rate of 3 per cent should be abolished as it was main cause of corruption and was promoting non-registered persons. The sales tax should be broadened by including wholesalers which are presently missing link. Similarly, there are about 10 services which could be taxed.
Mr Khandwala at length discussed restrictions on claim of input tax (SRO 578(I)/98. Referring to exemptions, he said they were being gradually withdrawn which was directly bringing more people below the poverty line. There is increased unemployment, therefore, any indirect tax would further affect them adversely.
He suggested that food items, medicines, computer, books, contraceptives should be kept exempted from sales tax. The exemption on self-supply of intermediary products should be exempted from sales tax whether the ultimate product is taxable or not.
