ST on services: Sindh government collection increases to Rs 21.2 billion in July-April

Sindh government sales tax collection on services has increased to Rs 21.2 billion in July-April 2011-12, up by 65 per cent over Rs 12.8 billion sales tax on services collected by the Federal Board of Revenue for the same period of last year.
Representatives of Sindh Revenue Board (SRB) have stated at a seminar jointly organised by the FBR and GIZ that average collection of sale tax on services increased to Rs 2.1 billion after SRB started collection in August 15, 2011 as compared to average collection of Rs 1.4 billion by the FBR. The meeting was informed that unlike the FBR that is collecting many taxes in many areas, SRB focuses on services sector and has already shown results in the first year.
The seventh NFC Award has empowered the provinces to collect sale tax on services and SRB was established by the Sindh government for collection of tax whereas other provinces have empowered FBR to collect sale tax on services on their behalf. Dr Kaiser Bengali, economist and Member of Sindh National Finance Commission (NFC) has reportedly suggested to the FBR to impose capital gains tax on permanent basis on stocks within 6 months of purchase and CGT on sale of property within 3 years of purchase.
He also suggested in a presentation made on ''"Harmonised Tax Regime for Growth" Bengali requested the government to take non-revenue maximising measures for advantage of industry challenged by the non-productive sectors such as stock market, land market, imports and commodity market. He said that the imposition of non-revenue maximising measures would enable to effectively discourage under-valuation in the buying and selling of immovable property and stock market business.
He proposed to the tax authorities to introduce ''Right of First Purchase'' by any buyer who offers, say, 15 percent over registered sale price and impose CGT on sale of property within 3 years of purchase. To check under-valuation of imports, he proposed that the FBR should introduce ''Right of First Purchase'' by any buyer who offers, say, 25 percent over CIF price. He also suggested to the government to introduce wealth tax with expanded base as it is not double taxation because it is tax on stock unlike income tax that is a tax on flow. Bengali contended that Wealth Tax would be instrumental in capturing the evaded amount of income tax. After all, nobody objects to tax on property (stock) and tax on income from rent.
He said the Reformed General Sales Tax (RGST) is a complex tax involving multiple adjustments and refunds. The RGST raises costs of doing business; added establishment costs; cost of foregone refunds and also raises corruption costs; secondary market for receipts and ''Extortion'' (eg, arbitrary arrests).
He proposed that the government should abolish the integrated RGST and replace RGST with bifurcated GST (VAT mode) on goods, collected federally and sales tax on services, collected provincially. No adjustments/refunds on sales tax on services. There is a need to reduce sales tax rate on goods and reduce sales tax rate on services to half the rate on goods (except for telecommunications and financial transactions).