There is no possibility of reimposition of 15 percent income tax surcharge to generate additional revenue during 2011-12 following current floods in the south of the country, which have made hundreds of thousands homeless and wreaked vast destruction to crops, livestock and infrastructure.
A senior government official told Business Recorder here on Wednesday that the Federal Board of Revenue (FBR) has not proposed restoration of income tax surcharge to the Ministry of Finance. The government, he added, has no intention of re-introducing surcharge and it was not made part of the Finance Act 2011.
The imposition of 15 percent surcharge on the amount of payable income tax for the period March 15, 2011 to June 30, 2011 was applicable on all income taxpayers whether individual, Association of Persons (AOPs), or companies. It was an across-the-board surcharge, levied without exception or discrimination, on all categories of income taxpayers.
There are three basic reasons for not proposing re-imposition of income tax surcharge. Firstly, the actual collection of surcharge is very low as compared to the projections for March 15, 2011 to June 30, 2011. So far, the FBR has collected around Rs 4-5 billion from income tax surcharge against the estimated amount of Rs 24 billion.
The final collection from surcharge would be clear after filing of income tax returns next month. The surcharge was only applicable for Tax Year 2011 and the FBR cannot calculate surcharge on Tax Year 2010 or Tax Year 2012. Due to technical and legal lacunas in collection mechanism of surcharge, the actual collection from surcharge was much lower compared to the projection of Rs 24 billion.
Sources said that the FBR has recently introduced a separate page for income tax surcharge in the new income tax return form. The FBR is likely to amend the return form to further simplify the columns pertaining to surcharge for filing of returns by persons liable to pay surcharge. The surcharge is payment related and if someone has made payment during the specified period, the surcharge would be calculated on the said payment. The income tax return form is being revisited to address the issue of refund and companies making losses etc.
Secondly, if the government has been able to meet expenses from existing resources, then there would be no requirement to further tax the existing taxpayers. Thirdly, the damage wrought by the current floods is much lower than last year when roads/bridges were destroyed and clearances from all major ports blocked.
The current floods have mainly damaged cotton and other crops on agricultural land in Sindh, which has no major negative impact on revenue collection. From revenue collection viewpoint, if the government imports cotton and other crops, it may have a slight positive impact on revenue. Thus, the situation does not merit re-imposition of the income tax surcharge the official added.