The sub-committee of the Revenue Advisory Council (RAC) would submit its final report on the wealth tax restoration to the RAC during its upcoming meeting. Sources told Business Recorder on Wednesday that a high-level committee headed by the Federal Board of Revenue Member Inland Revenue Khawar Khurshid Butt, has considered the pros and cons of wealth tax restoration.
"Yes, we will submit the report in the upcoming meeting of the RAC," a member of the Council said. The committee has been constituted by Dr Hafiz Pasha to examine the implications of wealth tax restoration on the economy. The revival of wealth tax has been examined in the backdrop of the 18th Amendment under which taxation of property has been transferred to provinces. The restoration of wealth tax has been reviewed in view the provisions of the 18th Amendment.
According to sources, most of the investment has been made in the real estate sector by the general public as well as investors. Secondly, the FBR has no legal authority to impose wealth tax on immovable property after 18th amendment in the Constitution, which bars the federal government from taxing the immovable property. A major chunk of investment made in the immovable property would be out of the purview of the wealth tax due to 18th Amendment. Apart from investment made in the immovable property, there is only movable assets left for imposition of the wealth tax. Therefore, the restoration of wealth tax seemed to be not an appropriate idea under the 18th Amendment. Under the previous wealth tax law, the federal government was empowered to impose wealth tax on both movable as well as immovable properties. Even if wealth tax is restored on movable assets such as vehicle, cash, jewellery, bonds and amount deposited in bank accounts, this seems not a viable option for the government.
The amendment in the Federal Legislative List Part-I of the Fourth Schedule of the Constitution has specified that the federal government cannot impose tax on immovable property, sources added. During last meeting of the RAC, some members strongly objected to the proposal arguing that wealth tax would result in flight of capital. There are many negative implications of restoration of wealth tax including transferring of investment/cash abroad by industrialists, etc.
The RAC would also review the progress on the overall position of revenue collection during 2010-11. The tax projections for 2011-12 would depend on the current pace of revenue collection in the last quarter of outgoing fiscal year. According to sources, FBR Member Customs Mumtaz Haider Rizvi would give a presentation on the customs valuation related issues.
During the meeting, FBR Member Inland Revenue Khawar Khurshid Butt would give a presentation on sectoral analysis of stuck-up arrears and tax-wise and region wise targets for 2010-11. The meeting would also review the budget proposals of the RAC members for fiscal (2011-12).