The Association of Certified Chartered Accountants (ACCA) has submitted budget proposals to the Federal Board of Revenue (FBR) for 2008-09.
The ACCA budget proposals aim at helping Pakistan achieve resilient economic and industrial growth through diversification of exports, attracting patient foreign investments, increasing success rate of small and medium enterprise (SMEs), reducing costs of business, developing a culture of savings and encouraging adoption of sustainable business practices.
The FBR had asked the ACCA to submit budget proposals under the theme of "Striving towards a more equitable Pakistan". To sustain industrial growth in Pakistan and to attract foreign investment, which, in turn, will give impetus to sustainable economic growth of the country, the ACCA proposed a reduction in the flat 35 percent corporate tax rates to 25 percent.
The budget proposals recommended that as sustainable business practices needed to be encouraged, 100 percent write off as depreciation should be granted to industries for the relevant costs of purchasing and installing equipment which helped minimise waste emission such as water treatment plants and waste disposal management systems.
The ACCA Pakistan also recommended tax incentives to the SMEs so as to increase their survival and growth rate. In this context, it was proposed that a Premium Status Allowance (PSA) be given to the SMEs.
This would entitle them to a two-year partial exemption (70 percent of taxable income) from the payment of income tax. The exemption period would commence from the production day. With a view to encouraging export-driven economic growth, the ACCA Pakistan made a number of recommendations.
As one of the main challenges faced by export sector was the unavailability of technically skilled human resources, the ACCA recommended tax benefits on the cost of staff technical training to fisheries, carpets, jewellery and handicraft sectors. It also proposed tax holiday for the establishment of new local technical institutes.
The budget proposals suggested that concession (reduced rate of tax), given to small companies, should be extended to all small companies irrespective of their date of incorporation (present date is July 1, 2005). Tax relief on capital equipment purchased to ensure continuity of power supply should be provided to the SMEs.
In relation to sales tax, the ACCA proposed that the threshold for registration, which had remained rupees five million for many years, should be linked to Consumer Price Index, which currently stood at eight percent per annum. To enhance the fairness and equality of Pakistan's tax system, Capital Gains arising from real estate and/or shares should be taxed.
The ACCA Pakistan also recommended that the FBR broadened the tax base and increase perceived fairness of taxation system by taxing agricultural income. As agricultural income is highly dependent on cyclical weather conditions, tax can be calculated by averaging agricultural income for two years.
Keeping pace with the FBR policy of lowering administrative costs and ensuring transparency in tax collection processes, withholding tax should be withdrawn. Sales tax and Federal Excise Duty should be merged as a single "value added tax" thus abolishing CVT. Index linked personal allowances such as old age allowance (60 years and above) and blind person allowance should be considered.