KARACHI, May 19: Site Association of Industry has urged the government to reduce the rate of sales tax to five per cent from 15 per cent besides bringing the income tax on all categories of tax payers to a minimum of 10 per cent. There should be only one rate of sales tax in the country.

Focussing on income tax, sales tax and customs tariffs in its pre-budget proposals for 2004-2005, the association said income tax law should be amended to bring it in line with international accounting standards and accounting regulations for avoiding archaic tax laws. It urged that the tax laws be framed in such a way that should encourage the public savings and the old investment policy should be restored.

On enlargement of tax base, the association suggested that database prepared on results of survey made by CBR recently should be utilised and new taxpayers be unearthed. All exemptions should be gradually eliminated and all segments of society be brought under tax net. To promote tax culture and enlarge its base, the government should provide as much incentives as possible and remove irritants confronting trade and industry.

The association asked the government to avoid double taxation in the forthcoming budget. For example 10 per cent withholding tax on dividend income is double taxation and this anomaly should be removed. Similarly, tax rate on corporate sector must be reduced to check tax evasion. Capital gain on investment in shares has been exempted for one year.

Tax on banking sector be brought at par with other listed companies and investors protection fund and members contribution fund of stock exchanges be exempted from tax, while mutual fund industry be given further tax incentives to deepen the investors base.

The association called for providing minimum protection of 10 per cent in customs duty between imported finished products and imported intermediary products for local manufacturing of similar products.

It demanded of the government to allow imports of plant, machinery and equipment, not manufactured locally, zero customs duty. Similar treatment is also sought for raw materials, not produced locally, which will definitely help in promoting industrial activity in the country.

Tax collection methods should normally be equitable, dignified, persuasive and compassionate and not to be intimidating or coercive and unnecessarily rigid. User-friendly atmosphere must be created.

The discretionary powers of the tax collecting authorities should be curtailed to the barest minimum and it should clearly be so defined and parametrised so as to provide no leeway for intimidation, abuse, or harassment.

Taxpayer should not be dealt with or treated as a criminal, and should be penalised for his fault, only in commensurate and compassionate manner. There is no logic in charging heavy lump sum amounts running in thousands for simple and ordinary delays in filing of papers or heavy rate of penalties on daily basis, which is, for small taxpayer, totally unbearable.

The Importers are subjected to income tax at port after adding sales tax to the cost, i.e. tax on tax, which is an anomaly, and defeats the rationale of good taxation. It is suggested that income tax charged on bill of entries be calculated without adding sales tax in the cost. Same principles be followed in case of supplies.

On smuggling, the association said that the inflow of fabrics from China, Far East and India has sounded the death-knell for the domestic producers. These goods are cleared with the active connivance of custom authorities and the border guards.

Every dry port has assumed a position of a state-within-a- state. It is a sad fact of life that the government has skewed the very concept of a dry port. Dry ports are facilities for exporters and not importers.

The government must withdraw the clearance of imported goods through these dry ports, as these are nothing but sanctuaries for smugglers. How can a domestic fabric producer file a case of anti-dumping against an importer of fabrics when the goods are cleared clandestinely or in an illegal manner, the association said.

The CBR must institute a committee that includes representatives of fabric producers, and each consignment must be examined and the contents analyzed. This is the pragmatic way to ensure that the fabrics are imported at true value.