All Pakistan Tax Bar Association (APTBA) has urged the government to curtail the powers of tax machinery to 'zero' level to build the image of revenue departments, and in this regard, evolve a system whereby a bona fide, strong, fair and free audit be provided.
The APTBA in its budget proposals for the fiscal 2004-05, submitted to the Ministry of Finance and Central Board of Revenue (CBR), said that 'it appreciates the economic policies of the government, which have brought many positive changes in the economy of the country.' "Economic achievements during the current fiscal year have shown excellent results."
It said: "Various steps taken by the government have led to higher growth in industrial production, decline in foreign and domestic debts, fiscal deficit reduction, decline in interest rate, unprecedented increase in credit to private sector, increase in foreign exchange reserves and remittances, upsurge in stock market and higher income in exports."
The credit of such achievements, according to APTBA, goes to the Ministry of Finance because of its higher economic activities. Since there were more imports, exports, supplies etc on which more withholding taxes were collected, the CBR has been able to meet its budgetary targets.
APTBA believes that as per a careful estimate 90 percent of the tax collection of the country is from withholding taxes, which are not paid as tax but as cost of goods, about 8pc as voluntary payment and 2pc through tax collecting agencies. Out of said 8pc and 2pc taxes, 80pc are being collected from multinationals and 20pc from general taxpayers.
"Therefore, the association proposes that accurate data of tax collection through withholding, voluntary payments and tax through agencies be prepared separately for income tax, sales tax, customs and central excise duty and must be brought before the nation."
It further said that the APTBA has always supported the healthy and positive changes, laws and procedures introduced by govt/CBR, besides appreciating the introduction of Universal Self-Assessment Scheme (USAS), CBR efforts towards facilitation of taxpayers, minimising the contact between the taxpayers and the collectors, taxpayer education and different computer programmes should be designed by the CBR.
However, it pointed out that these efforts are not sufficient to meet the requirements of Reforms Agenda and there is need to do a lot of work to achieve a real improvement in the taxation system.
"In spite of all its powers and commitments, the government seems helpless before taxpayers and tax collectors as former are not ready to come forward or to comply voluntarily while the latter are also not ready to withdraw their powers of discretion."
"If the government is desirous of building the image of revenue departments it has to go for 'zero' powers to tax machinery, APTBA proposed.
It further said that APTBA is against the abolishing of circle-based system and suggests that some modifications (which could change the entire working of the circles and with zero powers) this is the only system whereby the number of income taxpayers be enhanced up to 5 million, without any survey or panic in the taxpayers.
APTBA pointed out that the tax system of the country is heading towards an unidentified destination and it will require a decade to understand and know the results, which may also be a negative one.
APTBA is also not against the establishment of MTUs and LTUs or Model Tax units but the government could not accommodate all the taxpayers by establishing these units in a large number and tax agencies could not get any more revenue form these units.
According to a careful estimate, number of income taxpayers available on the ground is 5,000,000 ie 3.5 percent of the population; number of taxpayers is 1- percent ie 1,400,000 while number of return filers comes to 1,000,000. As far as sales tax is concerned, number of GST payers available on ground is 500,000; turnover taxpayers on the ground are 1,500,000. The number of taxpayers is 100,000.
To overcome the problems, like understatement and concealment by return filers, the government should fix the yearly targets of prospective filers and NTN holders.
TAX PARKS: To avoid scattered tax offices and waste of public money by way of paying huge rents, tax parks should be established by allocating 25 acres of land for big cities and 10 acres for small and medium cities where tax complexes with complete infrastructure and efficient work force be made available.
APTBA in the budget proposals also called for enhancing the number of return filers from one million to 5 million and in sales tax from 100,000 to 500,000 and 1.5 million turnover taxpayers.
To achieve these purposes the services of APTBA could also be availed to provide a mechanism to address these anomalies within a period of two/three years.
MYSTERY OF HIGH IT RATES: According to APTBA budget proposals, the argument that because of high income tax rate, people are discouraged to come to tax net is baseless.
It added that tax rates in Pakistan are reasonable as 97 percent taxpayers are liable to pay tax at the rate, which ranges from 5.75pc to 22.40pc, persons earning income of Rs 1,000,000/- are liable to pay tax of Rs 224,000/-, the average tax rate comes to 22.40pc, person earning up to Rs 700,000/- are liable to pay tax of Rs 119,000/- with average tax rate 17pc, on income of Rs 500,000/- tax rate is Rs 69,000/- with average tax rate of 13.80pc, on income of Rs 300,000/- tax is Rs 24,000 with average tax rate of 8pc and on income of Rs 200,000/- tax comes to Rs 11,500/- with average tax rate at 5.7pc.
For private limited companies straight rate of tax is 43pc, which would be gradually reduced to 35pc up to the year 2007 @ 2pc per annum reduction. For public limited companies straight rate of tax is 35pc and for banking companies it is 45pc, which will be gradually reduced to 35pc up to the year 2007 @ 2pc per annum.
In India, APTBA claimed the average tax rate is many times higher than it is in Pakistan. In India, the minimum tax slab is 20pc whereas the maximum 40pc. Exemption limit is Rs 40,000/-.
Income up to Rs 60,000/- tax slab applicable is 20pc, from Rs 60,000/- to Rs 120,000/- tax slab is 30pc and for income more than Rs 120,000/- the tax slab is 40pc. It further claimed that in England where the tax laws are the same as in Pakistan and India, the minimum tax slab is of 10pc and maximum 40pc.
There is no exemption limit and tax starts from very first pound. From 0 to 1,920 pounds tax rate is 10pc, from 1,921 pounds to 20,900 pounds rate of tax is 22pc, over 29,900 pounds rate of tax is 40pc.
The APTBA demand constitution of a high-level committee to investigate the loss of Rs 20 million hard earned public money spent in the name of income data processing and on feeding of income tax returns filed in September 2003.
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