Minimum tax on services sector to be reintroduced

The government has decided to reintroduce minimum tax on services sector in the budget to plug revenue leakage''s. Insiders told Business Recorder on Friday that the decision is aimed to catch unregistered taxpayers. They said that it would also help to cope with under-declaration issues.
They said that some Rs 113 billion may be generated as additional revenue after re-imposing minimum tax in the next fiscal year (2009-10). They said that the rate of minimum tax has not been ascertained but it is expected that it would be increased from 0.5 percent to 1 percent.
Sources said that minimum tax is going to be re-impose as a number of complaints against doctors, lawyers, real estate agents, consultants, etc, had been received, who concealed actual income to avoid admissible tax deduction.
They said that individuals or an association of persons were not required to pay income tax in case of loss, exemption from tax under the Second Schedule or other provisions of the Income Tax Ordinance or where tax payable was less than 0.5 percent of the declared turnover a minimum tax at the rate of 0.5 percent of its declared turnover was payable before 2008-09 budget.
Where tax so paid exceeded actual tax payable for a year, the excess amount of tax paid was allowed to be carried forward for adjustment against tax liability of succeeding five tax years. It was noted that collection of minimum tax had reduced to an insignificant amount over a period of time because of allowing special exemptions in the law or improvement in declaration of income. Even otherwise this tax had attained the nature of advance tax adjustable in succeeding five years.