The new budget is like a breath of fresh air for the common man as it brings a radical attitudinal change for the better. It marks a departure from the historical imperial approach of the budget-makers.
Previously the 'rulers' looked upon the suggestions and views of the 'ruled' with disdain. The Finance Minister has admitted, that it is for the first time that there was a regular interaction with the various stakeholders during the formulation of the budget.
This approach has been very productive and beneficial. Some long-standing general and legal demands have been accepted, which have led to the elimination of stifling provisions.
In a limited sense, the budget must be regarded as initiation of the correct democratic process in our national affairs.
The faint stirrings of independence from the International Financial Institutions (IFIs) are also visible.
In the name of capitalistic version of 'level-playing' field, the IMF imposed conditionalities to do away with Exemptions and Subsidies. Now that the country is in the process of breaking these shackles of IMF, the Finance Minister has given some new exemptions.
The budget must also be credited with introducing some bold new measures which should help the growth of the economy.
ACCEPTANCE OF LEGAL AND GENERAL DEMANDS:
TAXABLE INCOME BRACKET: There was a vociferous demand from the public that the existing minimum income of Rs 80,000 which was not liable to tax was too meagre to meet the minimum needs of an average family of 5/6 persons.
Some quarters suggested that at least Rs 20,000 per month (Rs240,000 per year) should be made exempt. However, by raising the threshold to Rs 100,000 the Finance Minister has substantially accepted this demand.
This is specially creditable in view of the fact that the limit to exempt income has been raised fairly regularly from Rs 40,000/- to Rs 60,000 to Rs 80,000/- over the last few years.
This shows that the government is aware of and responsive to the demands of the public.
FINALITY OF TURNOVER TAX FOR RETAILERS - NEW SECTION 113A OF ORDINANCE 2001: It was a persistent demand of the retailers, voiced through the Chambers of Commerce and Industry that because of lack of education and adequate means they were not able to keep detailed accounts.
To simplify the situation the turnover tax should be considered as their final tax liability.
This demand has been accepted. Retailers, having a turnover of upto Rs 5 million, have been given the option to avail this facility of turnover tax as their final liability.
ELIMINATION OF 15% TAX PAYMENT FOR FILING APPEAL - 127 (2) (B) OF ORDINANCE 2001: In many cases an exorbitant and wrong tax demand is raised in an assessment order.
Section 127(2)(b) requires payment of 15% of tax for availing the right of appeal. This often caused difficulties for the taxpayers.
Many assessees found it very difficult to pay this heavy amount, especially when it was illegally imposed.
Often the tax in appeal is deleted or reduced and the 15% tax becomes refundable. But the process of obtaining it is very laborious.
Taxpayers found that this provision caused unnecessary problems, because of which they could not concentrate on their business.
Shaukat Aziz has accepted their plea and decided to delete this provision. The taxpayers would certainly heave a sigh of relief.
PAYMENT OF ADVANCE TAX- SECTION 147(4) DELETED. NEW SECTION 147(6) ADDED: Some taxpayers have recurring tax liability on account of substantial income year after year. Such taxpayers were required to pay the last assessed tax in four equal instalments as advance tax.
However if in a succeeding year, the income was expected to decline a taxpayer was allowed to file an estimate of his reduced tax liability and make payment accordingly.
Section 18(A) of the Income Tax Act 1992, contained this proposition. Initially it was adopted in Sec 53 of Income Tax Ord '79.
However in 1997 the basis was changed and the advance tax liability was to be calculated in relation to the ongoing turnover with relation to the previous one.
The formula given in 1997 substantially increased the advance tax liability. It resulted in refunds and created problems for taxpayers to get it. It also reduced their cash flow. A hue and cry was raised against this change.
There was a great demand to revert to the original provision. Shaukat Aziz has accepted this demand and section 147 (4) of Income Tax Ord 2001, which contained the turnover formula, has been deleted and a new section 147(6) has been introduced restoring the original position.
EXEMPTIONS. - CLAUSE 93A OF ORDINANCE 2001 SECOND SCHEDULE:
EXEMPTION FOR TECHNICAL EDUCATION: Specialists have been emphasising since long that our educational system is producing generalists whereas our industry and economy need specialised skilled workers.
This mismatch is a major reason for the current high rate of unemployment and frustration among our youth.
A good step has been taken by exempting for 5 years the income of new technical and professional institutes which will be set up in the private sector. Need-based education should definitely give a boost to industrial production and growth of economy.
This exemption has been given in a new clause 93-A of the second schedule of Income Tax Ordinance 2001.
EXEMPTION OF WRITTEN-OFF MARK-UP - CLAUSE 3A OF PART IV OF IIND SCHEDULE: A number of sick industries could not pay the interest/mark-up to the banks.
In order to help revival of such units the State Bank has allowed the banks to write-off the mark-up.
As the law stands, this unpaid liability is the income of the sick units. In order to ensure that they are not burdened with tax on it the budget grants exemption to it.
This should help the sick units to stand on their feet, generate employment and increase much required production.
This exemption has been given in a new clause 3A, of part IV of second schedule.
BOLD NEW MEASURES:
ALTERNATE DISPUTE RESOLUTION COMMITTEE- SECTION 34 A OF ORDINANCE 2001: The rigorous implementation of law results in a great hardship because the provisions do not take into account the peculiar circumstances of an assessee which demand a sympathetic consideration.
Besides, the long-drawn out appellate battle also reduces the collection of tax. By means of the new provisions, the CBR will be able to appoint a committee and based upon its findings, pass an order.
If it is acceptable to the assessee all proceedings will end. Otherwise he will have a right of appeal.
If judiciously handled, this mechanism can provide much needed relief to deserving taxpayers and also increase tax collection. This measure has been incorporated in a new section 134A of Ord. 2001.
GROUP RELIEF- 59B OF ORDINANCE 2001: The concept of 'group of companies' is quite familiar in our country. It has been provided in the budget that a holding company having 75% shares of a subsidiary company can claim losses surrendered by the said subsidiary against its income for three years.
The mechanism provided in the new section 59B will sharply reduce the overall tax liability of a group and enable it to grow and expand its business.
We must learn to give credit where it is due. Of the 5 budgets presented by Shaukat Aziz this is the first one which has more content than rhetoric, which has more positive features than negative, and which seeks to provide tangible concessions to difficult sections of the society to encourage them to be more productive.
It is hoped that he continues in the same stride, interacts much more frequently and intensively with the stake-holders, identifies their genuine problems and redresses these in the same manner and spirit as he has done this time round.