May 21, 2006	Sunday	Rabi-us-Sani 22, 1427

KARACHI: The incidence of tax default is high in Sindh with the result that there is almost zero income from some taxes, including the tax on agricultural income.

Despite the fact the rate of agriculture tax is not high, nobody bothers to pay it.

The ratio of payment in property tax domain is also very low.

The poor state of revenue generation can be gauged from the fact that about 80 per cent of the revenue for running administration and executing development projects comes from the National Finance Commission award, while only 20 per cent is generated from domestic resources.

The dismal collection of taxes in the province is not only due to lack of a tax culture but also absence of a modern automated tax collecting machinery, which helped the Central Board of Revenue to increase its revenue manifold but not before a costly and lengthy system of computerisation was in place at the cost of millions of dollars provided by the World Bank for tax reforms.

The property tax, a major revenue spinner in urban areas, is not collected to its real worth. There are widespread incidences of non-payment of property tax in urban areas due to big difference in rates of tax on rented, non-rented and commercial properties.

Taxation experts feel that if the difference in rates is reduced the collection will increase. At present, owners try to evade high tax by declaring their commercial property as residential and rented premises as self-occupied.

Experts feel that the present property tax rates are high for different categories but the government is committed to bringing them down to one per cent under the national housing policy.

Under the devolution programme, income from property tax collected by the provincial government is transferred to district governments.

Another major revenue spinner for the Sindh government is the motor vehicle tax which is charged according to the size of the vehicles and their categories with respect to personal or commercial use.

There is widespread evasion of motor vehicle tax and the government has been considering a plan for several years to merge the tax into fuel price to make up for the shortfall in revenue. Under the scheme the owners would be required to pay the tax with the petrol price.

Experts have strongly opposed the idea as any such move would add to the already exceptionally high price of petrol and this would further burden the average citizen already paying high cost of essential items.

According to the taxation experts, there is a likelihood of increase in the motor vehicle tax and registration rates in the new budget as the number of vehicles has considerably increased and the budget planners hope to get a good chunk of revenue under this head.

Other sources of revenue for the government are: excise duty on hotels and liquor, stamp duty on property deeds and a tax on professionals.

While the CBR is still trying to bring the professionals under the tax net, the Sindh government is charging a nominal tax from them, but its collection is not worth counting.

The sources of non-tax revenue are: Abiana on irrigation at a fixed rate, fines on traffic violations collected by police, education fee, medical charges of government hospitals and charges on civil works under the CWSP.