ICAP recommends government to document agriculture income in new budget

ISLAMABAD: The Institute of Chartered Accountants of Pakistan (ICAP) on Saturday recommended the PTI-led government to document agriculture income in the upcoming budget for 2019-20 without changing constitution composition.

The ICAP also proposed to slap digital tax, abolition of presumptive/fixed tax regime, and integration of federal and provincial tax authorities under one window solution.

These recommendations were shared by ICAP President Jafar Hussain and ICAP Chairman Ashfaque Tola with the committee on fiscal laws during a press conference on Saturday.

While highlighting proposals relating to the documentation of agriculture income, Tola said that there was dire need to tax agriculture income under a more transparent and documented manner.

The taxation of agricultural income might remain within the domain of the provinces, but there was no bar under the Constitution on the federal government from documenting the agricultural income and agricultural assets as well as income earned from it.

Ashfaque Tola said that said low tax-to-GDP ratio was the main impediment in the economic development, which compelled governments to take short-term tax measures. “At present, there is over dependence on the indirect taxes. There is a dire need for administrative reforms and formulating long-term strategic policies,” he added.

About digital tax, he said the proposed digital tax could be initially introduced at the rate of 30 percent (on non-resident companies having no establishment in Pakistan) on their income from advertisements from Pakistan.

“These companies are not adequately taxed as they are not established within the country. This will also encourage local software service providers to get registered and earn from local advertisements,” the ICAP chairman said.

About the adjustment of sales tax refund with income tax liability, he proposed enabling provision in the Sales Tax Act and Federal Excise Act, in line with section 170 of ITO, for adjustment of sales tax/ FED refund sales tax/income tax / FED liability. The ICAP suggested that all presumptive/value addition/fixed tax schemes be abolished and, all such sectors / goods be brought under a uniform tax regime to promote the culture of income-based taxation.

The ICAP recommended that all tax revenue authorities should provide one-window solution for the taxpayer. This would be not only for enabling inter-adjustment of refunds, but also for one-return for both the federal and provincial taxes. In this regard, STRIVE should be implemented at provincial level also along with integration with the federal return.

He said that a policy board comprising FBR chairman as well as heads of provincial boards should be formed to ensure uniformity in policies, tax rates and procedures of the federal and provincial revenue boards.

Standard schedule of services should also be introduced. The provincial statutes should provide classification of taxable services in a more consistent manner to provide clarity and help reduce unnecessary litigation.

The ICAP recommended that income from export of ‘all types’ of services be exempted in line with the IT-enabled services or, at least, export of services be subject to reduced rate of tax as applicable in case of export of goods.

About the multiple audits, the institute recommended that no audit should be initiated unless specific scope and guidelines were available in the law.

“Different sales tax rates prevailing across provinces needed standardisation. Standard rate of sales tax should be reduced to 13 percent, in line with the SST to attract more taxpayers into the tax net, reduce cost of doing business and bring equity with other provinces,” it recommended.

For giving a sense of benefit to filers, non- filers should be penalised heavily in the form of withholding tax, say 50 percent higher rates.

‘Further tax’ on sale to unregistered person should be increased to five percent. Extra tax on commercial and industrial utilities connection should be increased to 15 percent for unregistered persons, the institute recommended.