Salaried class: FTO tells FBR to bring down tax slabs, thresholds in FY23 budget

ISLAMABAD: The Federal Tax Ombudsman (FTO) has strongly recommended the Federal Board of Revenue (FBR) to bring down the personal income tax slabs and thresholds for salaried class and other categories of taxpayers in the budget (2022-23) keeping in view the rising inflation.

Sources told Business Recorder that the FTO has submitted budget proposals (2022-23) for consideration during the next fiscal year focusing on documentation, taxpayers’ facilitation, expanding the tax net, checking mal-administration of tax officials and addressing genuine problems of the business community.

According to the budget proposal, the personal tax rates and thresholds to be adjusted with rising inflation, and tax rates of both income tax and sales tax be gradually brought down in view of rising inflation rates. A decrease in rates would also promote broadening the tax base.

The FTO has recommended that the review of tax policies is essential, especially where incentives are provided at the cost of the national exchequer to promote and develop certain areas/segments of the economy e.g. the impact of policies of tax credit for greenfield investment. The balancing and modernization to promote exports of certain sectors are essential to see if the desired results are achieved or if there is a need to review the policy.

Daily wagers: FTO asks FBR to fix income limit for tax exemption

The FTO proposed that the auto manufacturers through their dealers book new cars against partial payments and do not accept full amount pay orders/drafts initially. They do this practice to avail the benefit of time and price hikes in automobiles. “Instruct them to receive full payment pay orders at the time of booking. It will save consumers from price hike and secondly it will curtail “ON” pricing on vehicles,” the FTO budget proposal revealed.

The FTO office has also recommended the FBR to restrict the registration of retailers under the Point of Sales (POS) system to only large superstores, franchises and business of chain outlets. The measures like POS registration and doing away with zero-rating for exporters-cum- manufacturers are creating quite unrest in the business community. These need to be looked into afresh and made simple, easily understandable, and enforceable and the requisite rules may be made more transparent. POS registration needs to be restricted to the large superstores, franchises and business of chain outlets only.

The banking company, non-banking finance company and insurance company, subject to tax under the Fourth Schedule, are excluded from the determination of the capital gains tax (CGT) under section 100B of the Income Tax Ordinance. As a result, such entities determine the CGT on their own while filing their income tax returns. It is proposed that sub-section 2(b) of section 100B of the Income Tax Ordinance may be deleted to further extend the CGT regime. The proposed amendment will help increase in documentation as well as enhance revenue generation, the FTO said.

Rule 4 of the Eighth Schedule requires that the National Clearing Company of Pakistan Limited (NCCPL) should pay the amount collected by it on behalf of the FBR on yearly basis on July 31 next following the financial year in which the amount was collected. To change the date from July 31 to August 15 in order to synchronize the payment of tax with the submission of quarterly returns and issuance of annual tax certificates.

Currently, the services offered by the Pakistan Stock Exchange Limited (PSX) and Pakistan Mercantile Exchange (PMEX) are subject to withholding of tax at a reduced rate of three per cent. Since clearing, settlement and the risk management of all trades executed at the PSX are executed by the NCPPL, therefore, it is considered appropriate that the name of the NCPPL be added along with the PSX, FTO proposed.

The FTO further recommended that there is a general complaint on the part of the taxpayers that the income tax return form to be filed under section 114 of the Income Tax Ordinance 2001 is very complex and difficult to understand and still difficult to fill.

It is recommended that the annual income tax return form may be simplified by having a single page with fewer columns to fill, in both English and Urdu languages. More emphasis should be placed on filing annexures with returns wherever required.

For example, salary income, property income, and income from profit on deposits, singly or combined, may not require much information which may necessitate annexures.

Copyright Business Recorder, 2022