KARACHI: Chief Executive of Pakistan Business Council (PBC) Ehsan Malik has forwarded suggestions to Federal Finance Minster Ishaq Dar that can be implemented quickly to enhance tax revenue from the un-taxed and under taxed sectors of the economy and to economize public expenditure to manage fiscal account.
In a letter to the Finance Minister, he urged the government to tax the untaxed sectors to meet IMF’s requirements on fiscal deficit. The temptation hitherto has been to levy further taxes on those sectors that already pay taxes. PBC identified significant potential in taxation of agriculture, properties, wholesale, retail and by curbing under invoicing.
In proposing higher advance taxes on non tax return filers, PBC noted the tendency of the FBR to become over depended on this mode of tax revenue instead of pursuing those outside the tax net to file returns. However the current fiscal pressure calls for further penalizing non filers through higher advance taxes.
Other suggestions included enhancing withholding tax on non-filers:
1:- Advance Income Tax on sale and purchase of property should be rationalized at 7 percent for both buyers and sellers who are non-filers.
2:-Section 7E- deemed rental income be extended to non-filers in addition to filers as at present.
3:-Advance income tax on electricity bills for non-filers having industrial, commercial and domestic connections should be significantly increased.
4:- Withholding/ advance income tax @ 20 percent of business class ticket should be charged to non-filers.
5:- For registration of motor vehicles by non-filers, advance tax depending on engine capacity be increased from the current Rs 600,000 –Rs 1,500,000/- to Rs 2, 000,000 - Rs 4,000,000/-
6:- While a consensus is required on mechanism for tapping the additional Rs 372 billion in the form of income tax on agricultural income, the FBR needs to link with provincial revenue authorities to ensure that the exemption claimed on agriculture income is only allowed once confirmation of agricultural income tax having been paid to the provinces is received.
Potential for increasing collection for un-taxed, under tax sectors:-
1:- True potential for taxation of real estate sector has been estimated at Rs 500 billion, in the near term the FBR values need to be corrected to reflect market values.
2:-The retail and wholesale sector has a potential for an additional Rs 234 billion which can be tapped not only by increasing advance income tax on electricity bills but also be ensuring proper implementation of sales tax under the VAT mode and through monitoring sales and income by a more aggressive implementation of the POS system’
3:- For the Rs 488 billion revenue lost due to under–invoicing, there needs to be Electronic Data Interchange (EDI) on import values with the major trading partners as well as better and more transparent valuations by Customs.
Austerity in public expenditures and reduction in consumption of energy
1:- A Rs400billion saving over the next 2 years is estimated if the federal and provincial governments and their affiliated departments and corporations implement a freeze on the purchase on new vehicles.
2:- Federal and Provincial governments need to agree on a mechanism for sharing losses incurred due to electricity and gas theft.
3:- All ministers/ departments/ functions devolved to the provinces should not have a federal equivalent.
4:- To conserve electricity, working hours need to be adjusted to make the most of daylight hours as well as charging a higher premium on electric units used during peak hours.
Copyright Business Recorder, 2023
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