The absence of tax broadening measures and harmonisation of sales tax rate to 16 per cent proposed in budget 2012-13 will increase deficit financing and inflation in next fiscal year, tax experts said on Friday.
Talking to Business Recorder, Adnan Mufti FCA, Partner - Shekha & Mufti, Chartered Accountants, said that the government instead of exploring new revenue generation venues through tax broadening measures had proposed to fix an unrealistic budgetary target of Rs 2.5 trillion for next fiscal year that would cause to increase deficit financing and inflation.
He said that although the proposed harmonisation in the rate of sales tax would provide relief to the common man, the same would force the revenue managers to announce amnesty schemes in next fiscal year to achieve budgetary target. He said that the elimination of excise duty on 10 items and retrospective exemption of FED on services rendered by Asset Management Companies (AMC) were the positive proposals in budget 2012-13.
Mufti further said if the government failed to minimise its expenditures in next fiscal, the budgetary target should be rationalised to avert illegitimate practices in tax offices. Commenting on Budget 2012-13, Saleem Kasim Patel, regional chairman, Association of Builders and Developers of Pakistan (ABAD), said that the government had completely neglected the construction industry in the budget.
In spite of providing relief to construction industry for its revival, the government is going to increase the rate of sales tax on steel sector from Rs 6/Kwh to Rs 8/Kwh that would lead to escalation of cost of construction, he maintained. Moreover, he said that the cement price had already been increased by Rs 10 per 50kgs-bag hence the reduction in FED on cement from Rs 500/PMT to 400/PMT would not create any significant impact. He feared that the shortage of houses would not only increase but its price would also go beyond the affordability of the common man.
Faisal Mustaq, general secretary Karachi Customs Agents Association (KCAA), termed the budget as business friendly, saying that the reduction in general tariff slab from 35 percent to 30 percent would curb illegal trade. Munawar Sheikh, president, Karachi Tax Bar Association (KTBA), said that the proposed budget 2012-13 would not bring any significant change for revival of the economy. He said the initiative to allow the commercial importers, exporters and suppliers to opt out Presumptive Tax Regime (PTR) against the normal tax regime would open the doors for corruption and added that the government has not offered any major relief to the masses.
Syed Rehan Hasan Jafri, vice president KTBA termed the proposed budget as industrialists-friendly, saying that the government should have announced more relief for common man rather than the industrialists. He said the basic exemption in income tax, which was proposed up to the income of Rs 400, 000, should have been fixed at Rs 800, 000.
In the past, the tax broadening exercises had brought only 10 percent new taxpayers in tax net. Therefore, the government has to take flawless tax broadening measures to achieve its revenue target, he said.
Ali Rahim, former president, KTBA said the government has presented a balanced budget for next year under prevailing circumstances. He said the budget would provide substantial relief to salaried persons and association of persons and added that the reduction in turnover tax from 1 per cent to 0.5 per cent was also laudable. He said the agriculture sector, which contributes 20 percent to the GDP and only one percent in revenue, should have been documented. Rahim said the government should tax agriculture income by bringing middleman into the tax-net.
Abdul Qadir Memon, former president, Pakistan Tax Bar Association (PTBA), said the corporate rate should have been rationalised to provide maximum relief to the corporate sector. "Although the government is expecting to generate substantial revenue from the proposed measure to collect 1 percent tax against the sales made to traders and distributors, there is no mechanism to ensure the said deduction made by the manufacturers is deposited," he added. He said the revenue target for next fiscal year was unrealistic. The reduction in minimum tax rate from 1 percent to 0.5 per cent besides increment in the limit of cash withdrawal from Rs 25000 to Rs 50000 were noticeable measures in budget 2012-13," he added.