Budget lacks tax broadening measures: experts

The absence of tax broadening measures and increase in sales tax rate to 17 percent proposed in budget 2013-14 will increase deficit financing and inflation in next fiscal year, tax experts said on Wednesday. Talking to Business Recorder, Adnan Mufti FCA, Partner - Shekha & Mufti, Chartered Accountants, said, "The government despite exploring new revenue generation venues through tax broadening measures has proposed to increase sales tax to 17 percent from the exiting 16percent that will increase deficit financing and inflation."
He said that there was nothing good in the budget. He added that end-consumers would face 24 percent virtual impact of one percent increase in sales tax that would promote tax evasion culture. Mufti said, "All botched measures including further tax on unregistered persons, imposition of Federal Excise Duty (FED), etc that were redundant in past are going to be imposed again in budget 2013-14."
"The proposed restriction imposed on registered persons to withhold 100 percent tax on the supplies from unregistered persons will indirectly remove tax exemption granted to the persons having turnover below Rs 5 billion under sixth schedule that will not only violate the law but also open rooms for corruption," he pointed out. Instead of bringing transport, retail and wholesales sectors into tax net, incumbent government is keen to squeeze already registered persons to generate Rs 60 billion additional revenue through proposed increase in sales tax that might cause high inflation, he added.
"My question is from the revenue authority, what is the outcome of tax reforms? What I believed is that huge funds of World Bank were extravagantly spent only on infrastructure and no heed was paid on strengthening of enforcement and promote tax culture," he said.
Abdul Qadir Memon, former president, Pakistan Tax Bar Association said that although the government had proposed to reduce tax from 35 percent to 34 percent for non-banking companies, there was nothing good for common man.
Arshad Jamal, Senior Vice President, All Pakistan Customs Agents Association, said that the budget won't do anything for common man but encourage illegal trade. He added that the government should have reduced tax rate in budget 2013-14 to promote industrialisation and discourage corruption and hyper-inflation. "We were expecting business friendly budget from newly-elected government but they disappointed the business fraternity," he added.
He maintained that the government could have generated substantial revenue, if they had taken measures to eliminate corruption in FBR in this budget Saifullah, President, Karachi Customs Agents Association (KCAA) termed the budget as horrific for common man, saying that no new initiative has been proposed for improving lifestyle of common man. He said that tax reduction on vehicle imports would not create positive impact for upper middle and middle classes but facilitate elites.