ISLAMABAD: Finance Minister Abdul Hafeez Sheikh on Friday said that the government has accepted a major proposal of the business community, reducing turnover tax by 50 percent - from one to 0.5 percent in budget (2012-13), which would be instrumental in solidifying the cash flow position and resolve the liquidity problems of the business community.
Hafeez Sheikh stated this while addressing a post-budget press conference. He added that the liquidity in the coffers of business community would help generate more economic activities. The reduction in turnover tax rate would have long lasting impact on the business. A key feature of the budget (2012-13) is the simplification of tax procedure with the objective of facilitating the business community.
In budget (2012-13), the honest taxpayers have been facilitated particularly the salaried class. To provide relief to those who earn less, basic exemption limit has been raised to Rs 400,000 for salaried and business individuals. The existing slabs are proposed to be reduced from 17 to five. The salaried persons are regularly paying their taxes and they deserve relief in payment of taxes. It is necessary that the burden of taxes should not be increased on the salaried class already paying taxes.
The government has honoured its commitment that the FBR will not increase burden of taxation on the honest taxpayers. However, maximum relief has been provided to the honest taxpayers including salaried persons. Around 1.4 million people including salaried class, business individuals and association of persons (AOPs) would benefit from the enhancement in the exemption threshold and reduction in the number of slabs. Previously, tax of around Rs 5,000 was being deducted from persons earning monthly salary of Rs 50,000 and now only Rs 1,500 tax would be paid by the person drawing monthly salary of Rs 50,000.
Responding to various queries on documentation of elite class, he said that the government is fully geared up to trap the un-documented rich persons and bring them into the tax net, as it seems that they want to operate out of the tax regime by not paying the due amount of tax - even after the introduction of self-assessment scheme few years back. The enforcement and administrative measures would strictly be applied to deal with non-compliant persons, bringing them into the documented regime. It is interesting to note that these persons are availing all the concessions and facilities, but now they would be trapped to pay the due amount taxes, as enough is enough. The government has made all efforts to convince them and now these habitual non-compliant persons would not be able to avoid the authorities grip and would be forced to pay their due share of taxes to the government exchequer.
He said that the business community has also been provided another major relief by reducing the higher rates of 19.5-22 percent sales tax to the standard rate of 16 percent in budget. In this budget, sales tax rates have been brought down to bring basic change in the sales tax structure with simplification of procedure.
He said that there would be only two taxes in future ie sales tax and income tax. In order to generate revenue, the government will bring changes in the organisational structure of the Federal Board of Revenue (FBR) to improve tax administration for increasing revenue collection. Secondly, the FBR will focus on recovery of arrears and pursue tax related cases in courts to end litigation in major cases. The audit would also be used as an effective tool to improve compliance of the registered persons.
During current fiscal, the government has witnessed increase of Rs 400 billion in tax collection which should be appreciated. This is for the first time in the history of Pakistan that such a major increase of Rs 400 billion has been witnessed in the revenue collection of the FBR. The fiscal 2011-2012 could be termed as best year in the history of Pakistan as far as revenue collection is concerned. The additional revenue of Rs 400 billion clearly reflects that the FBR team has shown extraordinary performance during 2011-12.
Finance Minister gave credit of this remarkable performance of the FBR to FBR Chairman Mumtaz Haider Rizvi, FBR Member Inland Revenue Shahid Hussain Asad and other team of tax managers. "Is any past government has generated such a huge amount of taxes in the past? Nobody in the past has shown such an extraordinary increase of Rs 400 billion in revenue collection," he said.
Sharing latest data, the FBR Chairman said that the notices have been served to around 0.563 million new taxpayers. Out of these notices, 83, 000 persons have filed their income tax returns. So far, Rs 3.5 billion revenue has been collected from these persons and demand of Rs 10 billion has been created against the new taxpayers. The documentation of the economy is a gradual process and we are on the right track, he added.
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