ISLAMABAD, May 19: The budget planners have proposed new measures to collect sizable additional funds through income tax in 2006-07 instead of expanding general sales tax (GST) to new items, which is still considered a very high contributor in tax collection compared to other countries in South Asia.

Reliable sources told Dawn on Friday that the CBR had been asked to expand the tax base, plug the loopholes and come up with an effective audit policy to unearth those taxpayers, who understated their income.

The sources said that budget makers were also considering collecting data from various sources about the income of the people, who were currently not filing tax returns with the department.

Currently, the share of GST paid by consumers irrespective of their income rose to 40.6 per cent in total tax collection in 2004-05 from 33.62 per cent in 1999-2000. During the first 10 months (July-April) of the current fiscal, this share further rose to 50 per cent.

While the share of income tax in total tax collection increased to a mere 30.9 per cent during 2004-05 from 30.3 per cent during the year 1999-2000. And the share of income tax during the July-April period this year stood at 36 per cent.

Besides, this huge share of GST in total collection, the rate of GST in Pakistan, which is 15 per cent, is still the highest in the region and needs to be brought down to help the common man.

In India, the highest GST rate is 12.5 per cent and lowest 4 per cent and 1 per cent on silver and gold ornaments, in Sri Lanka 12.5 per cent, Nepal 10 per cent, Bhutan 10 per cent and Bangladesh 15 per cent.

The share of income tax in total tax in India was much higher than central sales tax (CST) which was levied on some products.

As a result of the measures announced in the budget 2006-07, the Indian government claimed to have collected additional amount of Rs400 billion under the head of income tax.

The income tax has effect of reducing inequalities in income and asset distribution between different segments of a society.

An expert on taxation, Muhammad Arshad said that one per cent decrease in inequality is likely to reduce poverty by 8.5 per cent, whereas one per cent increase in per capita income reduces poverty by only 3.6 per cent. He said that in Pakistan the richest 10 per cent of families contribute 0.3 per cent of their income in terms of income tax. While the poorest 10 per cent pay 16.1 per cent of their income as indirect taxes —mostly GST and the riches 10 per cent pay 9.9 per cent of their income as indirect tax (GST).