KARACHI, June 13: The hotel room capacity tax will be cut by 20 per cent from July 1, 2008 on demand of the hotel owners, sources at the ministry of excise and taxation revealed on Friday. The current rate of hotel tax is 80 per cent of the capacity charged at a uniform rate for all hotels.

The sources said that a decision to this effect has been taken by the Sindh government and it will be announced in the new budget.Under the new tax rates 60 per cent of the room capacity will be charged from the hotels with room rent less than Rs1,000 per day. However, hotels with room rent more than Rs1,000 will have to pay tax at the rate of 70 per cent of their capacity.

The Pakistan Hotel Owners Association had made representation with the Sindh Chief Minister and Excise and Taxation Minister and pleaded to cut the tax as the number of foreign visitors to Karachi has substantially reduced due to the law and order situation and political uncertainty.

The ministry of excise and taxation collected Rs9,271.6 million during the first eleven months (July-May) of the current fiscal year compared with Rs7,777.103 million collected during the same period last year marking over 19 per cent increase. The ministry hopes to collect Rs9,800 million exceeding yearly target of Rs9,480.4 million.

The break-up of the tax collection indicate that the collections in motor vehicle tax exceeded by Rs122.4 million, excise duty by Rs259.47 million, infrastructure cess by Rs1083 million, hotel tax by Rs17.6 million, and cotton tax by Rs13.7 million. Professional tax is the only tax in which the collection fell short by Rs2 million.

Director General Excise and Taxation Asif Marghoub Siddiqui told Dawn that efforts were being made to recover Rs6 billion of infrastructure cess, which are stuck up with the Sindh High Court. Some importers challenged the infrastructure cess in the SHC and were depositing bank guarantees equal to their tax amount in the court since November 2003. The department’s revenue would haven been much higher if the bank guarantee amount is added to the 11 months collections.

Meanwhile, Sindh Excise and Taxation Minister Mukesh Kumar Chawla reviewed tax collection performance of various departments and lauded the efforts made by the tax officers and staff. He, however, exhorted the staff to double their efforts to generate more revenue direly needed for the development projects as well as for providing relief to the poor against skyrocketing prices of essential commodities.

He said he would ask the finance department to allocate Rs2 million in the next budget to give cash awards to the excise and taxation staff showing outstanding performance in tax recovery.