ISLAMABAD, May 22: The Rawalpindi Chamber of Commerce and Industry has proposed raising of income tax exemption ceiling up to 250,000 and a reduction up to 60 per cent duty on import of CBU cars across the board.

The RCCI budget proposal made available to Dawn on Saturday also suggested to the government to allow the import of re-conditioned cars and auto parts, simplify procedure for registration and de-registration of taxpayers and abolish double taxation on some items.

According to the RCCI, at present the exemption limit of Rs80,000 was very low, which resulted mostly in taxing the lower income people. Any person earning Rs6,667 per month becomes liable to pay income tax, which resulted in increasing the burden on the poor people.

It was proposed to exempt the income up to 250,000 from income tax; 10 per cent to be charged on income between Rs250,000 and Rs400,000; 15 per cent on income between Rs400,001 and Rs600,000; 20 per cent on income between Rs600,001 and Rs800,000; 25 per cent on income between Rs800,001 and Rs1,000,000; and 30 per cent on income above Rs1,000,000.

Defending the proposal, the RCCI said the proposed tax rates would place extra disposable income in the hands of consumers. Resultantly, the higher level of consumption will lead to higher economic activity. The net outcome will also be generation of more indirect taxes (collected on consumption) and a positive growth cycle for income tax itself.

At present the government was deducting income tax on amount inclusive of sales tax, which amounted to double taxation and was prohibited under the law. That practice should be stopped and income tax should be calculated on the amount exclusive of sales tax.

Under the Income Tax Ordinance (ITO), no deduction is allowed on account of expenditure if payment was not made through a cross cheque. Only payments below Rs5,000 have been allowed as an exception.

It was proposed that the exception limit may be raised to Rs10,000. As per section 147 of ITO 2001, advance tax was payable by the assessees if their income was above Rs200,000. The chamber proposed that only such assessees may be made to pay advance income tax who have their last assessed income in excess of Rs2,000,000. It was also proposed that only half of the amount of the last assessed income tax may be collected as advance income tax in four equal quarterly instalments.

According to section 153 of the Income Tax Ordinance 2001, prescribed persons were reacquired to deduct withholding tax, if the payments exceed Rs25,000. This limit was too low and needed to be increased to Rs100,000.

Customs duty on import of vehicles was very high. As a result of over-protection the tendency of profiteering has taken roots. Moreover, it has resulted in a highly inefficient car assembling operation. The RCCI, therefore, proposed that customs duty on import of CBU cars be reduced to 60 per cent across the board. It was also proposed to allow import of re-conditioned cars. It was also recommended to allow import of used auto parts to generate revenue for the government.

The RCCI also proposed that duty on pharmaceutical products should be calculated on the weight (per kg) and the import of life-saving drugs should be exempted from any duty and tax. It was also proposed that for reducing the costs, research and testing equipment might also be exempted from any duties or taxes.