THE financial bill 2012-13 has proposed minimum number of amendments, raising fears of mini-budgets to come in the next fiscal year. For the time being, policymakers have put the most serious economic and financial issues under the rug.
All macro-economic issues have been left unattended. The much needed measures for bringing all category of taxable incomes net tax net remains a dream yet to come true.
Sooner or later the government will have to confront the core issues defying solutions so far. While the government plans to improve tax-to-GDP ratio in coming years to 15 per cent, tax experts fear that if the proposed revenue measures are adopted by the National Assembly in their present shape, the tax-to-GDP ratio—-lowest in the region and at nine per cent—- may decline further.
According to Federal Board of Revenue (FBR) aggregate revenue effect of the amendments proposed in the Income Tax Ordinance, 2001, Sales Tax Act, 1990, Federal Excise Act, 2005 and other relevant amendments in the finance bill 2012-2013 will bring in Rs63 billion. The impact of relief measures given under different heads of taxes and customs duties comes to Rs31.220 billion. The net revenue effect will not be more than Rs31.772 billion.
As a result of these proposed measures, the revenue effect on customs side will be lower by Rs1.228 billion. But on sales tax and federal excise duty (FED) revenue collection will come to Rs29 billion and after deducting Rs5.50 billion to be given towards relief, the net revenue effect will be Rs23.50 billion.
However, on income tax side the revenue increase will be highest at Rs34 billion but relief given to salaried class in basic exemption, to association of persons and increase in cash withdrawal from banks will have net effect of Rs9.5 billion , yielding in net revenue of Rs24.5 billion.
Tax consultant Younus Rizwani Sheikh said without widening the tax net, the budget making will always remain an exercise in futility. There has been strong demand from all quarters for bringing agriculture income under effective taxation. It is time to take up this issue seriously to ensure country’s financial sovereignty.
How long the burden of taxation will remain around less than three million taxpayers ?.
With regard to some of the proposed amendments in the Income Tax Ordinance, 2001, he was critical about powers to be given to the commissioner (appeals) to stay the recovery of tax for a period not exceeding 30 days.
“The proposed amendment is unfair and unjust where abnormal heavy tax demands are created by providing very short period of stay of demand. This will not provide a level playing field to the taxpayer,” he maintained.
Harsh conditions are being laid down for the acceptance of return of income-tax ( through amendment in section 114 sub-section 6 ) by inserting new clause C, stating if conditions are not met in taxpayer’s return, it will be treated as an invalid return or as if it had not been furnished.
Mr Rizwani giving expert opinion stated that this proposed amendment if implemented will roll back the entire scheme of Universal Self Assessment Scheme and the trust reposed in taxpayers will be considered to have been taken back by the FBR.
Another tax consultant Abdul Qadir Memon was critical about the proposal to reduce the experience period to three years from five years for commissioner Inland Revenue Service for taking the post of accountant member of the appellate tribunal.
Similarly, he rejected the proposal for allowing accountant member to become chairman of the tribunal. Mr Memon argued that the Income Tax Appellate Tribunal falls under the ministry of law, its structure is based on judicial system and therefore the chairman should only be a judicial member.
However, proposal to impose capital gains tax on immovable property held for a period up to two years is being taken as a significant change from the past and now on disposal of immovable properties capital gain tax will be levied at the rate of 10 and five per cent (held for one and two years respectively ) on profit on such sales.
The federal government has taken this step after taking an opinion from the law ministry because under devolution programme most of such taxes have become provincial subject.
The scheme for introduction of taxpayer honour card for those who fulfill minimum criteria of taxation is being appreciated by tax consultants. They even suggest that its ambit should be extended and be made compulsory for travel abroad and seeking elections as member of the Parliament and the Senate. The tax credit scheme to be allowed for newly established industrial undertakings including corporate dairy farming have been lauded as such measures, it is felt, would go a long way to promote industrial activity.