Salary tax slabs need correction in budget: ACCA

The Federal Board of Revenue (FBR) is expected to revise the salary tax slabs in Budget (2013-14) as per directions of the Federal Tax Ombudsman (FTO) to remove major anomaly in last three tax slabs under Finance Act 2012. The issue of anomaly in tax slabs for salaried class was raised by a tax expert of the Association of Chartered Certified Accountants (ACCA) during a pre-budget seminar here on Friday.
According to the budget proposal of the ACCA shared by Munir Malik, Member Fair Taxation Subcommittee ACCA, salary tax slabs need correction in Budget (2013-14). In this regard, the salary tax slabs required to be amended as per directions of FTO. In the Finance Act 2012 major tax relief was announced to salaried tax class however when the Finance Act was passed major anomaly occurred in last three tax slabs. The fixed component in these slabs did not tally with the maximum tax factor of earlier slab. ACCA has suggested the said anomaly should be removed and all salaried class should get tax relief to avoid brain drain of professionals from Pakistan. Federal Tax Ombudsman in Complaint No 88/Isd/Suo Motu (1)1100/2012 dated 17.08.2012 has already directed FBR to resolve the said issue (http://fto.gov.pk/decisiondoc/1100-12-C-suo_moto.doc). The tax relief to salaried class should be provided from July 1, 2012.
Tax expert informed that revision in the salary tax slabs in line with the FTO decision would provide relief to the salaried class and remove anomaly in the salary structure as per Finance Act 2012. ACCA Pakistan in collaboration with Islamabad Chamber of Commerce and Industry (ICCI) organised a pre-budget discussion here on Friday with an aim to contribute its efforts towards healthy fiscal measures in the country. The event commenced with welcome remarks from Malik Mirza, CEO, U Microfinance Bank and Chairman, Members Network Panel, ACCA Pakistan, who discussed three broad policy recommendations for FBR which included more fairness in the system, certainty and lastly pointed out that the burden of tax payments should be shared by all people and across all sectors. ACCA Budget proposals were shared by Munir Malik, Member Fair Taxation Subcommittee, Members Network Panel, ACCA Pakistan and financial controller, Premier Oil.
Ayla Majid, Director Business Advisory Services, Khalid Majid Rehman Chartered Accountants and an active ACCA Member gave the commentary on the current monetary and fiscal policy. The seminar concluded with a vote of thanks from Noor Aftab, Head of ACCA Islamabad and was attended by economists, employers and members from the financial fraternity. The ACCA has strongly proposed the FBR to rescind the section 153A of the Income Tax Ordinance 2001, requiring every manufacturer, to collect income tax @ 0.5 percent on sales from distributor, dealers and wholesalers.
According to the budget proposals of the ACCA, through Finance Act, 2012-13, new section 153A was incorporated, requiring every manufacturer, to collect income tax @ 0.5 percent on sales from distributor, dealers and wholesalers. Later it was held in abeyance upto 30.06.2013. It will again be applicable from 01.07.2013. The rationale of this tax is not understandable as 0.5% advance tax on turnover for distributor/dealers/wholesalers is many times higher than their actual income tax liability. It is strongly recommended to withdraw this permanently for registered taxpayers. The decision would reduce the creation of unnecessary income tax refunds. Also give incentive to distributors/dealers/wholesalers to register themselves as we are recommending that this tax be abolished only for registered taxpayers, ACCA added. The budget proposals of the ACCA revealed that the sub-section (4) of section 111 of Income Tax Ordinance 2001 to either deleted or only applicable to foreigners showing proof that they were residing outside Pakistan for at least 2 tax years and are now investing their monies in the economy. The proposal would tap the possibilities of whitening untaxed money by misuse of this provision, discourage the unorganized sector and eventually increase tax-to-GDP ratio.
To provide relief to the industry, corporate tax rates should be reduced to 34 percent as presently this sector is paying 35 percent Income tax, 2 percent WWF, and 5 percent WPPF. The global economic downturn has left many governments struggling for better fiscal policies while maintaining a balance between the deficit and tax collection. Countries across the world, but especially in the South Asian region, have benefited over some time from reductions in corporate tax rates. Keeping in view the total burden of taxes and the need to boost economic recovery, it is proposed that corporate tax rates in Pakistan should be rationalised.
The corporate tax rate applicable in Pakistan is between 35 percent - 42 percent. There is also a reduced rate of tax of 25 percent for small companies that meet certain criteria provided in the law. In order to promote private sector investment in Pakistan it is proposed that the corporate tax rate should be gradually reduced. ACCA has proposed a reduction of the corporate tax rate to 34 percent and that of listed companies to 33 percent.
ACCA has further proposed that the FBR has not withdrawn the rights for recovery of federal excise duty (FED) as yet. This has affected the Bank with the double liability on account of FED and sales tax on services. The input tax adjustment issues are not resolved as e-fbr is not integrated between federal and provincial. The FBR, Sindh Revenue Board (SRB) and Punjab Revenue Authority (PRA) should resolve their issues and create harmony for taxpayers in order to cater for input tax adjustments, it added.