• Taimur Chambers Plot # 10-D (WEST), Fazal-ul-Haq Rd, Islamabad
  • (+92) 51-2278134, (+92) 51-2278135
  • Taimur Chambers Plot # 10-D (WEST), Fazal-ul-Haq Rd, Islamabad
  • (+92) 51-2278134, (+92) 51-2278135

Policy Recommendations Details

Key Recommendations:

  • Basic principles behind budget-making process should be to improve macro economic stability, sharing of tax burden by powerful elite and non taxed sectors, social protection and keeping a deep sight of future challenges such as climate change, water crisis and debt-servicing.
  • There is dire need to widen tax regime instead of focusing more on current approach of reinforcing rigorous taxation on existing tax payers. Over seven hundred thousand out-of-tax net Pakistani elite who are evading taxes should be brought into tax net which will contribute significantly into resource generation for country. According to a recent estimate, over 700 billion rupees can be yielded through widening of tax regime.
  • Over 330 billion rupees can be saved by addressing leakages and irregularities in public sector expenditures.
  • Every income should be taxed and sectors such as agriculture, exports and high income services like doctors, property dealers, and consultants should be brought under taxation. Currently no tax is payable on agricultural income under the Income Tax Ordinance 2001.  To increase the percentage of GDP to tax, the said income should be taxable and suitable constitutional amendment be made and the pertinent should be taxed through current Finance Act.
  • Pakistan has four types of tax rates for different tax payer’s identities such as 35% tax rate for public private companies, 25% tax rate for small enterprises, 25 % for association of persons and 7.5 to 25 % for individuals. To provide healthy competition and level playing field it is proposed that corporate tax rate to be reduced and at per with the rate of other tax payers identities.  It will also encourage the tax payers to form companies and enter in to organized and documented sector.  Apart from the above it is also pointed out that rate of 35% (going to increase to 37.5 % in budget 2011-12) on corporate sector is way too high as compared to other regional countries. The prevailing rate is ranging between 15 to 30% in these countries. 
  • Condition of NTN Certificate should be imposed on every sale, purchase, transfer, gifts mutation, integral, sale agreement and power attorney. Withholding tax at rate of 6 (six) percent should also be imposed on all the above mode of transactions. Transactions of plots of Societies such as DHA, Bahria Town, Askari etc are being carried out by exchanging files and recording transfer of plots without mentioning any value of such transactions. To cover these transactions, value of such plots should also be bring at par with DC rates. Further it should be mandatory for transfer of vehicles at any stage and withholding tax at rate of 6 percent should also be imposed on locally manufactured vehicle to bring it at par with that of imported vehicles.
  • Existing sales tax regime can produce the same results of RGST by emplacing reforms  such as a uniform tax rate across the board (currently 16 rates different rates exists), abolish all special procedures (currently 21 such items exists) and omit 3rd schedule (related to retail and is against very principle of sales tax )  .
  • Currently threshold limit for deduction of tax is 25,000/- in a day and rate is 0.30%.  To rationalized these provisions and encourage citizen to abide and declare their banks, the exemption limit of Rs.25,000/- be enhanced to Rs.100,000/- on the other hand rate of deduction of tax to be enhanced from 0.30% to 0.5%.
  • Emphasis should be on rationalization of different taxes while ending double taxation.
  • Section 177 of Finance Act, 2010 gives vast unconditional discretionary powers to the Commissioner at the field formation level without any restrictions to call for the records etc, and conduct audit of the income tax affairs of any person or class of persons.  This is against the norms of taxation and subject to misuse and harassment of the taxpayers. It is imperative that such powers need to be regulated for judicious use in a manner that reduces the discretion and at the same time facilitates the smooth operation of audit.

These recommendations were presented by speakers mentioned below at a recent seminar /panel discussion held at SDPI, Islamabad.

 

Tile of the Event: Forthcoming budget 2011-12: opportunities and challenges

Collaboration: ActionAid Pakistan. 

Date Monday: May 23, 2011

Moderator:

  • Dr Syed Nazre Hyder, Senior Economic Advisor, SDPI

Speakers:

  • Dr. Pervez Tahir, Former Chief Economist, Planning Commission of Pakistan
  • Mr. Sakib Sherani, Former Principle Economic Advisor, Ministry of Finance
  • Dr. Athar Maqsood Ahmed, Head of economics department at National University of Science and Technology (NUST)
  • Mukhtar Ahmad Ali, Executive Director, Centre for Peace and Development Initiatives (CPDI)
  • Hafiz M. Idrees of Income Tax Bar Association, Rawalpindi