The Association of Certified Chartered Accountants (ACCA), commenting on the budget, has said the progressive slab rate being offered to small companies whose turnover exceeds Rs 250 million is a step to encourage local investment and the application of withholding tax rate of two percent instead of five percent charged to commercial importers will lower the cost of business.
It said: "However, the decision to exempt capital markets from the capital gains tax will result in the continuity in speculative trading and relieving a profitable sector of economy from taxation.
"The abolishment of minimum tax on declared turnover at 0.5 percent is another step towards fairness of taxation system as compared to the earlier system where companies incurring losses or with low profits had to pay turnover tax.
"The introduction of a taxing system to tax builders at Rs 50 per sq. ft. of covered area and developers of open plots at Rs 100 per sq. yard of the plot will widen the tax base," it said. It also said the first year allowance offer at 90 percent of the cost of plant, machinery and equipment for industrial set up in rural and underdeveloped areas would result in economic development of the downtrodden.
"It is felt that treatment of tax profit transferred by a branch of foreign company out of Pakistan as dividend and chargeable to tax at 10 percent, will increase tax revenue, but may have a negative effect on foreign direct investment as earlier this profit was sent free of tax. "The tax credit on donation has been reduced from 30 percent and 15 percent (for individuals and companies respectively) to 10 percent, it said, adding the proposed amendment would deprive poor of the generous donations previously given by donors.
"About sales tax, zero-rating of molasses for manufacturing acetic acid used in the textile sector will lower cost of production. "Similarly, exemption of energy saver lamps will result in optimal use of limited energy resources. The rate of sales tax has been proposed to increase from 15 percent to 16 percent. This increase will further escalate the inflationary pressures on the economy," it adds.
It also says the increase in exempting salaried people - from Rs 150,000 to Rs 180,000 per annum and in case of women from Rs 200,000 to Rs 240,000 per annum - will give relief to salaried individuals, since an individual earning Rs 15,000 per month (incase of women Rs 20,000) will be exempted from tax. "The introduction of marginal tax relief will not only give relief to salaried individuals, but it is also a step towards fairness in the taxation system," it adds.