ICCI, RCCI budget proposals: RGST should not be implemented under any circumstances

Local trade bodies have strongly opposed any move to implement the RGST in the upcoming budget (2011-2012), but supported the government plan to withdraw sales tax exemptions to broaden the tax base. In their budget proposals, Islamabad Chamber of Commerce and Industry (ICCI) and Rawalpindi Chamber of Commerce and Industry (RCCI), have recommended the FBR not to experience new laws.
As the existing laws are maturing and taxpayers are getting familiar with the existing system, the new law will create confusions among the taxpayers, which will result in loss of tax revenue. Under no circumstances, should RGST be implemented, they recommended.
They have also proposed tax on real estate business and the capital gain on such transactions. A large number of people have earned from the real estate business but without contributing to the National Exchequer. It has been suggested that tax should be imposed on real estate business and the capital gain on such transactions. As the agricultural sector is Pakistan's largest sector, it has been suggested that agricultural income should be taxed, either through the Federal or provincial governments. However, the tax rate should be nominal.
The proposals said due to high inflation, the prices of consumer goods are increasing day by day, hence the excise duty on consumer goods such as ghee, edible oils, fuels, natural gas be reduced and duty rate may be enhanced on luxury items to increase the tax revenue.
Under the tariff rationalisation plan, the customs duty on the import of items being produced locally be increased to promote the industry. The duty on raw materials imported by local industry be reduced to facilitate the local industry. Afghan transit be regulated strictly so that such imports may not hamper the local industry. The duty on smuggled prone items be reduced to induce the legal imports, it suggested.
The trade bodies have also suggested that the tax base can be broadened by doing away the exemptions. However, the tax rate needs to be slashed to practical and realistic level, so that people willingly pay the tax and do not take it as a burden. It is proposed that rate of sales tax be reduced to 5 per cent, as the Government has recently seen in the removal of the Zero Rates facility on the five export oriented industries. Let the Government not take steps in any way that may require itself from "backing down." Step need to be well thought out prior to its implementation. Retaining the Sales Tax system will help the Government to document the economy and ultimately the tax revenue through direct taxes would increase.
"The existing Tax to GDP ratio is substantially low. The FBR has put efforts to increase the ratio; but, all the efforts are being put to increase the tax collection from the existing tax payers, rather than to increase the tax base. The fact remains that the number of tax payers is very small, as evident from the number of tax returns being filed. Therefore, it is proposed that efforts should be made to increase the tax base and not to burden the existing tax payers," the trader bodies urged.
To increase the number of taxpayers, the trade bodies have proposed that the National Tax Number should be made compulsory for sale/purchase of the property and other assets. The NTN should also be mandatory for all new and existing electric and gas connections. Moreover, the current procedure of getting NTN has been made a cumbersome process, and should be made easier in line with NADRA issuance of ID cards. Integration of data between NADRA, SECP and the FBR is required for identification and registration of all companies, proprietorship, private or public. "The FBR has almost successfully automated system for filing of returns etc, but at the same time some problems are being faced by the users.