KARACHI: In its proposals for the upcoming budget, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) demanded steep cut in the rate of sales tax – standard 7 per cent, non-adjustable and non-refundable both for local and imported goods.

The FPCCI stressed that high rate of sales tax is the root cause of tax evasion, corruption, narrow tax base and smuggling.

The federation suggested that in the value added chain industry, sales tax may be collected at 0.5pc at each stage of value addition.

If the government finds it unacceptable it should reduce standard sales tax rate to 12.2pc in VAT mode.

The FPCCI budget proposals are divided in three portions pertaining to sales tax and federal excise duty, income tax and customs offering alternate solutions to the issues confronting trade and industry.

The FPCCI is also seeking an amnesty scheme for small traders, who have not been filing sales tax return but have been filing income tax returns, giving them

the option to either de-register from the sales tax regime or resume filing the tax returns without penalties.

The sales tax portion carries 37 proposals and builds a case against the tax machinery of abusing power. It demanded action against corrupt tax officers.

It further stated that since there is no legal provision under Sales Tax Act to hold tax officials accountable for excesses it alienates the business community and shake their confidence.

The FPCCI has stressed to broaden the tax base. It stated that at present the total number of National Tax Number (NTN) holders is four million but only very small percentage of these have filed their tax returns.Last year, only 1.1 million NTN holders filed their tax returns.

The income tax part of the budget proposals contained 70 sections.

The customs part of the proposals is relatively small with eight sections which are mainly focused on rationalisation of customs tariff.

The FPCCI demanded that duty on primary raw materials, secondary raw materials, intermediate goods, semi-finished goods and finished goods should be levied on the basis of cascading duty structure.

The proposals also briefly discussed need for distinction between finished goods importers and raw material/machinery importers. It urged to simplify Duty and Tax Remission for Export (DTRE) scheme.

Published in Dawn, May 21st, 2017