Budget 2013-14 puts no additional burden on genuine taxpayers: Dar PDF Print E-mail ISLAMABAD, Jun 12 (APP): The budgetary proposals for the fiscal year 2013-14 presented by Finance Minister Ishaq Dar in the National Assembly on Wednesday envisage encouragement of overall economic activity through prudent taxation measures without putting any additional burden on genuine tax payers.“The PML (N) Government seeks to encourage overall economic activity in the country and create a conducive environment which facilitates genuine investors and business. As we all know, when business flourishes, employment opportunities are created, investment flows into the country and ultimately, there is peace and prosperity”, Ishaq Dar said.He said to achieve these objectives, the Government has decided not to put additional burdens on those people who are already paying their due share of tax, but to make efforts to ensure that those who are not paying anything should be forced to contribute something to the national exchequer. The Finance Minister said the revival of national economy is the main focus of the PML (N) government, adding, this requires fundamental and structural reforms in the area of Taxation. Ishaq Dar recalled that the earlier PML (N) government raised Tax to GDP ratio to 13%, which was the result of simplification of tax laws, making taxes broad based, plugging loopholes in the system and holding tax machinery more accountable. The reform process was halted with the illegal and arbitrary dismissal of the PML (N) government and as a result, the Tax to GDP ratio declined gradually and is presently at alarming rate of 9%, he added. The Finance Minister said the focus of the budget 2013-14 is improvement in Tax to GDP ratio finally reaching to 15% by 2018, adding, the immense economic challenges being faced by the country require a smooth flow of revenue generated through our own resources, reducing reliance on aid and foreign loans. “It is of utmost importance that we become self reliant. The country is going through a severe energy crisis. Mobilization of adequate resources is required to address this issue so that suffering of our people are mitigated,” he added. The Finance Minister said the broad themes of the PML-N government’s taxation policy are (i) taxing those who are not paying any tax, (ii) enhancing efficiency of the tax machinery, (iii) removing anomalies and distortions in the tax system, (iv) simplifying the tax procedures, (v) broadening of the tax base, (vi) rationalization of tax rates and exemptions, (vii) encouraging corporatization and documentation (viii) taxpayers facilitation and (ix) to eradicate maladministration and corruption in FBR. He said a fair and equitable tax system lays more emphasis on direct taxes, so that the affluent classes of society pay more, adding, unfortunately, in our taxation system, indirect taxes have a major share, leading to tax burden on common man. “This year, a paradigm change has been made in proposing tax measures, as the overwhelming revenue proposals relate to direct taxes,” he added. The Finance Minister said the construction sector contributes Rs 1 billion to the national exchequer, which is not proportionate to its potential, adding, its taxation is normally spread over multiple years depending upon the period of construction. In order to simplify taxation of construction sector minimum tax on builders and developers is proposed, he said, adding, the tax shall be paid at the rate of Rs. 50 per sq. ft. of the constructed area; or Rs. 100 per square yard of the developed land, as the case may be. Ishaq Dar said the rates of tax on salary introduced last year overburdened the middle-income group, adding, this anomaly has been corrected through this Finance Bill by rationalizing the rates of tax on salaries in way that each income group pays tax according to its capacity. Rate of tax on business individuals and AOPs shall be rationalized with the addition of two new slabs, he said, adding, this will gradually increase the rate from current maximum of 25% for income exceeding Rs. 2.5 million to 35% for income above Rs. 6 million. To encourage corporatization, separate rates of WHT for non-corporate taxpayers i.e. commercial imports, contracts, supplies and services are being proposed, he added. The Finance Minister said new adjustable withholding tax is being proposed for foreign-based films and dramas to make them competitive with the local film industry. To bring dealers/Arhtis of commodities in tax net, withholding tax on the basis of registration category is being introduced, he said, adding, market committees shall collect this adjustable tax from such dealers. Ishaq Dar said to tax affluent class on the basis of its expenses, it is proposed that adjustable withholding tax may be introduced @ 5% on annual fee of Rs. 200,000 paid to an educational institution. Traders are not contributing to the tax revenue in keeping with their share in GDP, he said, adding, adjustable withholding tax is accordingly proposed to be collected from wholesalers and retailers in specified sectors @ 0.1% and 0.5%. The Finance Minister said the rate of tax to be collected from wholesalers and dealers is being reduced to 0.1% from 0.5%, adding, the manufacturers, distributors and commercial importers shall collect this tax. He said agriculture sector enjoys exemption from payment of federal tax but this facility has been misused as untaxed non agriculture income is concealed in the garb of agriculture income. In order to check the misuse of law, it is proposed that credit of agricultural income shall be given only if provincial income tax on such income has been paid, he said, adding, it will also facilitate in enhancing the revenue of Provinces from agricultural income. The Finance Minister said the law for obtaining information from bank regarding its customers is being aligned with international practices, adding, the objective is to strengthen the National data warehouse at FBR for tax base broadening. In order to expand the tax base, it is decided to utilize data collected by the Federal Board of Revenue and NADRA in a systematic manner, adding, in this regard profiling of 500,000 persons identified on the basis of financial transactions traced shall be carried out. Besides, display of NTN at business premises is also being made mandatory to broaden the tax net, he said, adding, these measures will increase out reach of the department and promote the culture of voluntary compliance. The Finance Minister said the construction sector contributes Rs 1 billion to the national exchequer, which is not proportionate to its potential, adding, its taxation is normally spread over multiple years depending upon the period of construction. In order to simplify taxation of construction sector minimum tax on builders and developers is proposed, he said, adding, the tax shall be paid at the rate of Rs. 50 per sq. ft. of the constructed area; or Rs. 100 per square yard of the developed land, as the case may be. Ishaq Dar said the rates of tax on salary introduced last year overburdened the middle-income group, adding, this anomaly has been corrected through this Finance Bill by rationalizing the rates of tax on salaries in way that each income group pays tax according to its capacity. Rate of tax on business individuals and AOPs shall be rationalized with the addition of two new slabs, he said, adding, this will gradually increase the rate from current maximum of 25% for income exceeding Rs. 2.5 million to 35% for income above Rs. 6 million. To encourage corporatization, separate rates of WHT for non-corporate taxpayers i.e. commercial imports, contracts, supplies and services are being proposed, he added. The Finance Minister said new adjustable withholding tax is being proposed for foreign-based films and dramas to make them competitive with the local film industry. To bring dealers/Arhtis of commodities in tax net, withholding tax on the basis of registration category is being introduced, he said, adding, market committees shall collect this adjustable tax from such dealers. Ishaq Dar said to tax affluent class on the basis of its expenses, it is proposed that adjustable withholding tax may be introduced @ 5% on annual fee of Rs. 200,000 paid to an educational institution. Traders are not contributing to the tax revenue in keeping with their share in GDP, he said, adding, adjustable withholding tax is accordingly proposed to be collected from wholesalers and retailers in specified sectors @ 0.1% and 0.5%. The Finance Minister said the rate of tax to be collected from wholesalers and dealers is being reduced to 0.1% from 0.5%, adding, the manufacturers, distributors and commercial importers shall collect this tax. He said agriculture sector enjoys exemption from payment of federal tax but this facility has been misused as untaxed non agriculture income is concealed in the garb of agriculture income. In order to check the misuse of law, it is proposed that credit of agricultural income shall be given only if provincial income tax on such income has been paid, he said, adding, it will also facilitate in enhancing the revenue of Provinces from agricultural income. The Finance Minister said the law for obtaining information from bank regarding its customers is being aligned with international practices, adding, the objective is to strengthen the National data warehouse at FBR for tax base broadening. In order to expand the tax base, it is decided to utilize data collected by the Federal Board of Revenue and NADRA in a systematic manner, adding, in this regard profiling of 500,000 persons identified on the basis of financial transactions traced shall be carried out. Besides, display of NTN at business premises is also being made mandatory to broaden the tax net, he said, adding, these measures will increase out reach of the department and promote the culture of voluntary compliance. The Finance Minister said in order to mobilize additional resources for enhancing the income support program for the poorest families in Pakistan, it is proposed to impose a small levy on affluent persons, adding, this levy shall apply on net moveable assets of persons on a given date @ of 0.5%. The receipts under this head will be credited to income support program of the government, he said, adding, voluntary contributions will be also be solicited to mobilize additional resources. “Let me admit that I shall be amongst the first ones who will be hit by this levy. According to my estimation, I will have to pay an additional Rs. 2.5 million on this count this year, but I will be too happy to make this contribution for the welfare of our poor people,” he remarked. In the areas of Sales Tax and Excise Duty, the Finance Minister said several measures have been proposed for broadening the bases of sales tax and excise duties for bringing into the tax net those who have remained outside so far. He said these measures are highlighted below. (1) An additional amount of sales tax of 5% is being imposed through electricity and gas bills of those having commercial or industrial connections but remain unregistered. Once they get registered, it will no longer apply to them. (2) All taxable supplies made to unregistered persons will include 2% further tax, for encouraging registration. Again, once they get registered, they will no longer have to bear this charge. (3) The sales tax withholding agents will now withhold the full amount of sales tax on purchases made from such unregistered persons. (4) Certain important measures are being initiated to enhance the efficiency of the tax machinery and increase its enforcement capacity. These measures are explained here. (5) To reduce leakage in sectors prone to evasion, the government is planning to initiate electronic monitoring of production processes through video links, tax stamps and labels, electronic tracking, etc. Effective monitoring without human intervention will help introduce a transparent, automatic, and error-free way to ensure proper payment of taxes by these sectors. (6) FBR has already developed a sophisticated computerized system, called CREST, which has recently helped to detect and recover billions of rupees from the textile sector. This system will be enhanced and expanded, so that leakages of revenue in other sectors can also be detected and recovered. (7) It is also proposed to introduce a simplified and centralized mechanism to block illegal refunds and input tax adjustments, to stop fake and flying invoices, and to prevent bogus registered persons from committing tax frauds. (8) To ensure proper monitoring of taxable activities, the registration of registered persons will be placed in the jurisdiction where its business premises are located. (9) In view of serious resource constraint it is imperative that additional resources should be mobilized immediately. Accordingly, it is proposed to raise the standard rate of sales tax from 16% to 17%. (10) Supplies made under international tenders used to be zero-rated, but were made exempt last year to stop creation of refunds and associated malpractices. However, this measure created a disadvantage for local competitors, as they could no longer claim input tax adjustment. To create a level playing field for both local and foreign competitors for international tenders, it has been decided to remove the disparity and place both local and foreign competitors under the same standard tax regime. (11) Zero-rating of sales tax on local supplies tends to create distortions and promotes malpractices. But since ordinary people also use many of these zero-rated items, sales tax is not being imposed on them and they are being exempted from sales tax. (12) It has been decided to expand the list of items in the Third Schedule to the Sales Tax Act. The measures will not only require manufacturers and importers to print retail prices on consumer goods, but also enable the government to capture the tax involved till the retail stage instead of the benefit going to unregistered wholesalers and retailers. (13) The five export-oriented sectors were enjoying zero-rating on local supplies over the past several years, which has recently been changed to a reduced rate regime. However, even expensive imported goods like branded clothes, leather bags, and sports goods are enjoying the reduced rate of 2%. Some items enjoying the reduced rates have multi-purpose use in other industries, which creates distortions. To remove these problems, finished goods and items having multi-purpose use are being taken out of the reduced rate regime. (14) In 2010, due to the prevailing situation, a general exemption of duties and taxes was extended to the tribal areas and some districts of Khyber Pakhtoonkhwa. These were supposed to be time-bound exemptions, and the income tax exemption has already expired. However, the notifications for sales tax and federal excise exemptions did not have any expiry clause. The continued exemption is creating a distortion and difficulties for businesses in other regions. It is, therefore, proposed to be withdrawn. (15) In case of federal excise, manufacturers of edible oil and ghee complained of distortion, as those using locally produced oil or imported oilseeds were not paying any tax. To remove this anomaly, locally produced oil and imported oilseed are being subjected to the similar tax regime as imported edible oil. (16) Presently, financial services offered by banking and non-banking sectors are subject to federal excise duty. There is no duty if other persons provide the same services. To remove this disparity, it is proposed that federal excise duty at the same rate may be imposed on all such financial services. (17) At present, imported edible oil is subject to tax. However, canola seed is being freely imported. This is not only a disparity but also hurts the local oil seed production. To remove this disparity, it has been decided to impose federal excise duty @ 40 paisa per kilogram on imported canola seed. (18) The Federal excise duty on cigarettes is simplified and re-structured, from three slabs based on a composite formula, to two slabs based on a specific rate. (19) It is proposed to allow the aerated beverage industry to pay tax on capacity or fixed basis. It would not only facilitate them, but would help them contribute a handsome additional amount to the exchequer. It would eliminate corruption and make the system transparent and clear. It will also encourage the industry to expand. The Finance Minister said the detailed notification for implementing the new regime will be issued shortly. Finance Minister Ishaq Dar said Pakistan’s import regime over the decades has become fraught with a complex system of discriminatory exemptions and concessions, adding, every year national exchequer suffers a cost of Rs. 100 billion on account of these exemptions. In today’s world of free trade and level playing field this cannot go on, he said, adding, we have to adopt a simple tax and tariff structure by abolishing the culture of SROs. The Finance Minister said in order to resolve this long protracted issue, a high level committee headed by Chairman, FBR is being constituted, adding, the committee will examine and finalize its report after consulting all the stakeholders and submit its recommendations to the ECC for tariff rationalization and minimization of concessionary regime. He said power shortage has become a chronic problem for the whole country. While major initiatives are being taken to address the power generation and supply situation, a major shift towards the use of renewable energy resources is also a need of the time. In this context various measures are being included in the current budget to encourage use of alternate energy resources by simplifying the procedure for duty free import of solar and wind energy machinery and equipment, he added. The Finance Minister said at the same time, duty on energy saving devices like energy saving tubes, solar water pumps etc. is also being exempted. Despite prevailing economic situation, every possible effort is being made to provide some respite to the suffering poor of Pakistan, he added. Availability of clean water is fundamental right of every Pakistani, he said, adding, in order to address the spread of water borne diseases through use of filtered water, rate of customs duties on water filtration equipment is being reduced. The Finance Minister said the use of imported POL products as a major source of energy has not only led to high import bill, but has also created a negative environmental impact, adding, therefore, use of alternate energy efficient Hybrid Electric Vehicles (HEVs) needs to be encouraged. He said it is, therefore, proposed that HEVs up to 1200cc will be exempt from duties and other taxes. From 1201cc to 1800cc 50% relief from duties and other taxes will be provided and from 1801cc to 2500cc, 25% relief is proposed. No relief will be available for vehicles beyond 2500cc. The Finance Minister said betel nuts and betel leaves are injurious to health, adding, in order to discourage their consumption, custom duty on both these items shall be increased. The proposed tax measures are the most important need of the economy, he said, adding, it will help us in reducing fiscal deficit and also reduce our dependence on external resources. “Thus this is an important move toward achieving self-reliance,” Ishaq Dar added.
Posted on: Wed, 12 Jun 2013 20:57:40 +0000
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