LAHORE: The Punjab government has proposed significant changes through the budget for the next fiscal year in its agriculture income tax (AIT) and urban immovable property tax (UIPT) regimes besides increasing the rate of professional tax and expanding the scope of sales tax on services to five more services and enhancing professional tax rates to mobilise additional revenues.

New tax measures are expected to yield Rs11 billion in additional revenue in 2019-20.

The government has increased its tax collection target to Rs294.9bn for next year from original estimate of Rs275.8bn for the outgoing year. Bulk of the tax revenues will be collected through sales tax on services (Rs166bn) and UIPT (Rs14.3bn).

The budget proposes to amend the provincial Sales Tax on Services Act 2012 to strengthen penal provisions of the law. The suggested amendments provide for minimum tax liability, improve recovery of tax and introduce modern electronic invoicing system at points of sale (POS) to plug revenue leakages. The amendments also modify description of some services to remove gaps and misapplication, and update for clearer understanding of tax obligations as part of effort to move towards negative tariff list.

The government proposes to increase agriculture income tax twofold to Rs2.1bn by doubling the rates of land-based AIT and raising the exemption limit of income-based AIT from existing Rs80,000 to Rs400,000 a year. The increase in the AIT rates has been proposed for the first time since 2001 in spite of a massive spike in prices of major and minor crops. The step is projected to improve the equity between tax on agriculture and non-agriculture incomes, according to the budget proposals.

In order to raise higher revenues from urban property, the finance bill 2019-20 proposes to extend the property tax rating areas to bring commercial and residential properties along highways and main roads, align rating areas with actual city boundaries and carry out fresh survey of properties as well as update valuation tables.

The suggested changes in the UIPT are in line with the federal budgetary proposals to deter speculative investment in the real estate and property to discourage parking of illegal and tax-unpaid cash in the property market.

The professional tax rates have been raised for factory-owners, commercial establishment, developers, exporters, importers, contractors, builders, and property developers. The 11 new professions proposed to be taxed include medical consultants or special dental surgeons, audit firms, tax consultants, architects, and engineering, technical and scientific consultants. Lawyers, stock exchange members, money changers, motorcycle/scooter dealers, motorcar dealers and real estate agents, recruiting agents will also pay professional tax in addition to several other professions.

A 5pc tax, without input adjustment tax, has been slapped on domestic and international travel. Similarly, the dress designers and stitching services will pay 16pc services tax.

Published in Dawn, June 15th, 2019