KARACHI, June 13: The government wants to do away with Presumptive Tax Regime (PTR) and exemptions to remove distortions from the taxation system, but there is some resistance from trade and industry.
However, measures have been taken in the budget 2007-08 to reduce the role of PTR and withdraw some exemptions.
This was stated by Director General Large Tax Payers Unit (LTU) Mukhtar Ahmed Gondil while speaking at a post-budget seminar organised by the Income Tax Bar Association Karachi (ITBAK) late Tuesday evening.
As a result of these measures, he said, revenue collection through direct taxes in new fiscal year would be higher at 42 per cent compared to 26 per cent of outgoing year. Similarly, exemption allowed to industry on import of raw material has been done away with and only one per cent import surcharge would be paid.
The seminar was largely attended by tax consultants and practitioners witnessed informative and knowledgeable sessions from speakers who discussed pros and cons of the new budgetary proposals. S. Masuod Ali Naqvi spoke on impact of the budget on the economy, S M Shabbar Zaidi on direct taxes and Mahmood Raza on indirect taxes.
Mr Gondil said that there was good progress in tax laws and presently Pakistan was being considered to have best income tax laws amongst the emerging economies of the world.
The last four years reform agenda being carried out by the CBR paid well as it help to gain taxpayers’ confidence. There had been transparency in revenue collection and all measures had been taken to minimise direct contact between tax official and taxpayers, he added.
The DG LTU said that all the stakeholders were taken on board in budget making process. For the first time, he said, that tax bars, State Bank and Securities and Exchange Commission of Pakistan (SECP) were given equal responsibility for the budget-making.
Mr Gondil said that SBP’s recommendations with regard to inclusion of Seventh Schedule for banks in the Income Tax Ordinance 2001, and in filing of tax returns were included in the budget documents. Similarly, he said that auditors were given due role in sales tax.
However, the rapid changes in tax laws have also changed the role of tax consultants and practitioners, who now have to assume the role of planners of taxes for business, industry and corporate sector in the light of global economy and market.
All this was possible after the CBR took a bold decision to introduce Universal Self-Assessment Scheme (USAS).
He said a number of measures had been adopted in the new budget under section 59B wherein corporate sector could have group relief in assessed losses.
Globally it has been in practice that a listed holding company could set off assessed losses of its subsidiaries owning and managing an industrial undertaking or engaged in providing services.
Similarly, Mr Gondil said that the budget had allowed group taxation under section 59AA wherein holding companies with wholly-owned subsidiaries may, by giving an irrevocable option, be taxed as one fiscal unit by filling out a single return of income.
The DG LTU agreed that Pakistan still had very low tax-to-GDP ratio and policy-markers were not only fully aware of the fact but were taking every measures to improve it.