ISLAMABAD, May 16: The government is considering a proposal to introduce flat rates for taxing the gross income of the salaried class in the next budget. Well-placed sources told Dawn on Tuesday that the budget-makers were actively working on the proposal to determine its actual revenue impact before announcing it in the upcoming budget of 2006-07.
Under the proposal, the sources said, gross salaries would be taxed without breaking up into basic pay and allowance, etc, for income tax purposes. However, the maximum income tax rate of 30 per cent would remain the same for the salaried class.
Since the current system of computing of tax is creating problems for the taxpayer, they said, it will replaced with a flat rate in a single percentage, which would be applicable to the gross salary.
They said that a similar kind of system for taxing the income of the non-salaried class was also under consideration, which was expected to be announced in the next budget.
According to them, the proposed new system could only facilitate the salaried class to compute their taxation liabilities without going into minor details.
Although the new scheme did not have any revenue impact, it would be worked out on the basis of current applied rates applicable on different slabs of income.
The sources said that proposed flat rates would be worked out in a way to cover the existing exemptions available to the salaried class.
