Long-term goals be set with stakeholders consultation: FPCCI budget proposals

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested that there should be consistency in policies, stable macro economic framework, market driven policies, liberalisation and deregulation and long term goals and vision be developed in consultation with the stakeholders of the economy ie; businessman, industrialists, professionals, judiciary and revenue department to make Pakistan economically a strong country.
In its proposals for 2004-05 budget, the FPCCI noted that in the last three years the government had been praised both locally and internationally for the achievements of substantial increase in foreign exchange reserves, stable foreign exchange rates and increased revenue generation. However, it was observed that tax-GDP ratio of the country is till one of the lowest in the world.
The FPCCI noted that it is also an undeniable fact that Pakistan does not have enough funds to earmark for education and health sectors and despite international assistance for poverty alleviation, 1/3rd population lives below poverty line of a dollar a day.
It indicates that the monetary and fiscal policies so far pursued are inadequate to support the goals for economic growth.
The FPCCI proposed that taxes must be equitable and fair between the different classes of society.
For the convenience of the taxpayer the government must economise and levy only the minimum tax which is necessary for the national good and the certainty and clarity.
It suggested expansion of tax base and reasonable reduction in the tax rates (according to capacity to pay tax), creation of conducive investment environment, curtailment of undesirable discretionary powers from various tax laws, simplification of rules and regulations, removal of irritants and impediments for seeking justice are important steps for economic progress.
The FPCCI suggested that the Government should immediately provide due attention and take appropriate steps for the effective growth of small and medium enterprises (SMEs) which have the ability to generate employment, bringing a lot of innovation and may play important role for expansion of tax base as well as in industrialisation of the country
(1)by promulgating stringent laws against such persons who are involved in smuggling and counterfeiting the highly taxed products manufactured in Pakistan
(2) to strengthen the institution of Federal Tax Ombudsman the President may:
Issue recommendation for insertion of the provision in the statute for providing an opportunity of hearing to a taxpayer before the review petition is finalised under section 32 of the Ordinance.
Issue recommendation for insertion of the provision in the statue for fixation of time limit for execution of order by himself, on the review petition filed before him in line with the ratio of judgements of the honourable Supreme Court of Pakistan reported as 1999 SCMR 2744 and 1999 SCMR 2189.
The FPCCI proposed that the Government should create awareness and patriotism in the people and motivate them to participate fully in the process of nation building by paying due share of taxes. Payment of tax has to be made a real matter of pride.
This goal can be achieved by ensuring that the tax machinery does not unduly harass the voluntary taxpayers and in return these existing clients will motivate others to follow suit.
The FPCCI suggested that database prepared on results of survey should be utilised and new taxpayers be unearthed for income tax purposes.
-- All exemptions should be gradually eliminated and all segments of society be brought under tax net.
REDUCTION IN TAX RATES:
-- Income Tax on all categories of taxpayers be reduced by a minimum of 10 percent.
-- Suitable reduction should also be made in rates of withholding taxes.
-- Rate of Additional Tax be reduced, keeping in view the present rate of bank mark-up.
-- Marginal Tax Relief for salaried taxpayer should be re-introduced.
INCOME TAX FORMS TO BE SIMPLIFIED:
Imputable Income U/S 169(4) should be subjected to the ratio Decendi of the Judgement of the Supreme Court:
ADVANCE RULING (SECTION 206 A):
-- The benefit of advance ruling should also be extended to resident taxpayers.
-- Taxpayers be allowed to file appeal against advance ruling before the Appellate Tribunal.
TAXABILITY OF PROFIT ON DEBTS (SECTION 39):
-- Tax deducted at 10 percent on profit on debt be treated as final discharge of tax liability on such Income and this Income should not be clubbed with other Income and taxed at normal rates.
LEVY OF TAX ON LOANS AND MARK-UP WRITTEN OFF BY BANK UNDER SBP CIRCULAR NO.29 [SECTION 11(E)]:
-- It is proposed that suitable exemption may be granted for loans and mark-up written off under SBP Scheme.
-- Frozen mark-up should not be added back u/s 34(5).
SEPARATION OF TAX JUDICIAL SYSTEM FROM TAX COLLECTION MACHINERY & EXPANSION OF FEDERAL TAX OMBUDSMAN'S JURISDICTION:
-- The Appellate Authority should function under Member (Legal) as Member Income Tax is responsible for administration of taxes.
-- All the appellate forums dealing with the Federal Taxes be assigned under the jurisdiction of Federal Tax Ombudsman.
DEPRECIATION AND INITIAL ALLOWANCE (SECTION 22 & 23):
-- Principle of full year depreciation and initial allowance may be revived. Corresponding changes be made in the Income Tax Rules, 2002.
-- Sub-section (14) of section 22 be suitably amended so as the consideration at export or transfer is fixed at cost less any depreciation allowed under the ordinance.
CAPITAL GAINS (SECTION 37):
-- Exemption granted under the Income Tax Ordinance, 1979 be restored.
AMOUNT RECEIVED AS A LOAN, ADVANCE, DEPOSIT OR GIFT OTHERWISE THAN BY A CROSSED CHEQUE [SECTION 3(39)]:
-- The words "otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding a National Tax Number Card" be substituted with the words "other than by any prevalent form of banking instrument".
PAYMENT AND ADJUSTMENT OF ADVANCE TAX (SECTION 147):
-- Provisions relating to filing of estimates be re-introduced.
-- It is proposed that the time limit for deposit of tax be extended up to 30 days for each quarter.
AMENDMENT OF ASSESSMENT (SECTION 122):
-- Further amendment may be allowed only if definite information is received subsequent to the passing of the amended order under section 122(5).
-- Once amendment is made under sub-section (5A) no further amendment may be allowed under this sub-section.
-- The Commissioner may not be allowed to delegate the powers u/s 122 to the Taxation Officer. Section 210 may be amended accordingly.
MANDATORY PAYMENT FOR FILING OF APPEAL [SECTION 127(2)]:
-- It is, proposed that requirement for mandatory payment of disputed tax demand for filing of first appeal u/s 127(2) be removed and effect may be given to judgement of Lahore High Court (Rawalpindi Bench).
POWERS TO ENTER AND SEARCH PREMISES (SECTION 175):
-- The powers should be restricted to business premises only and that also after the Commissioner issues show-cause or prior notice duly served on the taxpayer.
ADMISSIBILITY OF EXPENSES - GENERAL PRINCIPLES [SECTION 20(1)]:
-- In computing the income under the head "Income from Business" for a tax year, allowances and deductions should be made admissible for any expenditure laid or expended or incurred wholly and exclusively for the purpose of such business.
OPTION FOR TAXPAYERS TO OPT OUT OF PRESUMPTIVE TAX REGIME:
-- It is proposed that all taxpayers should be given a choice to opt out of the Presumptive Tax Regime and be assessed under the normal regime.
INADMISSIBILITY OF EXCESS PERQUISITES [SECTION 21(K)]:
-- It is proposed that any excess perquisites paid to the salaried person whose taxable salary is Rs 600,000/- or more be allowed as admissible expenditure.
DIRECT APPEAL TO THE HIGH COURT:
-- It is proposed that the provisions prior to amendment made in the year 2000 in the Repealed Ordinance for filing Direct Appeal to the High Court may be restored.
REMOVAL OF IRRITANTS AND IMPEDIMENTS IN DISPENSATION OF JUSTICE:
-- An effort should be made to remove the following irritants:
-- Frivolous appeals, review application and representation by tax departments.
-- Delay in reply of taxpayer queries/letters by the tax department.
-- Delayed decisions by the Appellate Commissioner, rectification of mistake and appeal effect etc.
-- Setting-aside orders by CIT(Appeals), instead of giving decision on merit.