The Lahore Chamber of Commerce and Industry (LCCI) has called for removing disparity in imposition of taxes on industry and other sectors and suggested the government to broaden tax net by imposing tax on agriculture income and services sector apart from fixing General Sales Tax (GST) at 12 percent.
The LCCI office-bearers, unfolding budget proposals for the year 2011-12 at a news conference here on Friday, said the industry contributes 27% to the GDP but pays 65% of total taxes. This disparity needed to be removed and other sectors including agriculture and services sectors should pay their due share of taxes to the national exchequer. They also expressed no trust over the procedure being followed by the government for making budgetary proposals and called for taking stakeholders into confidence before making taxation policies.
They also rejected government plan to impose wealth tax under the new title of asset tax and said they would oppose it strongly, if it was imposed by the government in the upcoming budget.
President LCCI, Shahzad Ali Malik, Senior Vice President Sheikh Mohammad Arshad, Vice President Sohail Azhar, former Senior Vice President Abdul Basit and others said that there should be no sales tax on essential food items, their raw material, pharmaceutical products, their raw material and educational material including stationery and printing paper. They also called for minimum rate of duty on the import of raw material along with well-targeted measures to discourage import of finished products for the sake of promotion of domestic trade and industry.
They urged the government to rationalise levies on oil products, as the fast increasing oil prices are having negative impact on economy hitting all the sectors alike. To cope with energy shortages in the long run, they said that there was a dire need to focus on construction of water reservoirs, as it is the only solution to ensure cheaper electricity. They also demanded withdrawal of increase in turnover tax and 25 percent flat rate of tax on AOPs.
The LCCI office-bearers urged the government to bring down the interest rate to single digit to expedite the process of industrialisation and help reduce cost of doing business in the country. They said that the taxable limit for income tax should be increased to Rs 400,000 while electronic system for the refund of sales tax be introduced. "All compliant and regular taxpayers be exempted from audit while tax payers must be facilitated. There is a common practice of tax department to start process of audit once the refund is determined. This shall be stopped. We also urge the FBR to settle down concrete audit parameters in consultation with the business community," they added.
In order to broaden the tax net, no new commercial utility connection shall be allowed without a valid NTN, they suggested. They further said that customs department treats importers differently at different ports and airports especially there is variance of rules at Karachi and other cities. The policy about loose cargo is also not same on the two ports. CARE system of clearance shall be applied to other cities as well, they added.
They further said that companies falling under the purview of Large Taxpayers Unit (LTU) have to bear brunt of repeated or frequent audits. This practice must be stopped. Presently, no compensation is allowed on holding back due refunds, the business community should be compensated if their due refunds are held back without any cogent reason, they said.
They further say in case of default of a supplier for sales tax the buyer shall not be held liable if payment is made through cross cheque. It is very unprofessional to punish the buyer, in case of sales tax default of the supplier.
They also proposed that alternate dispute resolution committee (ADRC) of sales tax should be revitalised. The sales tax input claimed by the buyer should be admitted if the supplier is not blacklisted at the time of making that claim or within six months. No arrest or FIR shall be registered against a taxpayer without giving him a show cause and the chamber should also be taken into confidence. And for this, the adjudication officer should not be below the rank of an additional commissioner, they said. The LCCI office bearers said that housing sector should be encouraged and particularly co-operative sector should be promoted to boost up the construction industry and to generate employment with a view to broaden the tax base.
They also proposed that infrastructure bonds would be introduced to develop infrastructure in the country while tax credit shall be given on these bonds. In view of the low growth prospects, they believe that the revenue collection for FY2011-12 should be set at Rs 1699 billion. This seems rather realistic and appropriate for supporting fragile economic recovery underway. "We believe the biggest hurdle in tax collection is the trust deficit between the taxpayers and the tax collectors. Due to harassment of the tax officials the people are not willing to come into tax-net, the system of the tax department should be reformed to encourage new taxpayers. The discretionary powers of tax departments and its officials should be curtailed," they added.
They further said that individuals having turnover of Rs 50 million or more are also declared as 'prescribed persons' and required to act as withholding agents' u/s 153 of Income Tax Ordinance, 2001. Therefore, anyone with more than Rs 50 million as turnover can automatically become the withholding agent and it is mandatory to deduct 3.5 percent as withholding tax. Hence, this step becomes illogical as many traders have over Rs 50 million in turnover, they said.
They said that incentives be given for making investment in manufacturing sector while minimum wage be fixed as Rs 8,000. Speaking on the occasion, the former LCCI Senior Vice President Abdul Basit rejected proposed 15 percent sales tax on poultry feed as it would raise the prices of chicken in the country to unbearable level.
To a query, the president LCCI said that there would be visible impact if tranche from IMF and US aid were not received. The government needed to facilitate the trade and industry to tackle the challenges posed to the country and economy. "We are at the forefront and every difficult time and would be ready for sacrifice for the country if any need arises," he said.
Senior Vice President LCCI, Sheikh Mohammad Arshad said that after the 18th Constitutional Amendment, powers of levying wealth tax rests with the provinces. The government intends to impose this tax with the name of asset tax that is unacceptable for people and they will challenge it at all forums. He also called for reviewing structure of duties to check smuggling.