ISLAMABAD: The government should commit itself to fiscal discipline, minimise wasteful expenditures and maintain complete transparency to demonstrate that public money is used in the most judicious manner, a voluntary network Taxpayers Alliance Pakistan said.
Taxpayers Alliance Pakistan released 14 points charter of demands for the upcoming budget of 2021/22. Taxpayers Alliance Pakistan is a voluntary network and any Pakistani citizen, individual or corporate body, who is a taxpayer and agrees with the mission can join the network. It is an initiative supported by an independent thinktank Policy Research Institute of Market Economy.
The alliance called for a shift from the regressive taxation structure to a progressive one by increasing reliance on direct taxes though imposition of a low-rate, broad-based, predictable, and wherever possible, flat rate taxes. It called for, and supported the move to, end discrimination and exemptions in taxes and has urged to tax all sources of income uniformly. Highlighting the plight of withholding taxes, the Alliance has asked for a gradual elimination of all presumptive taxes with certain exceptions.
The alliance also called for considering negative taxation while eventually replacing direct cash transfers, subsidies and cross-subsidies which suffer from poor selection thus wastage of resources.
The 14 points charter of demand is an evolving document, which the Alliance has now released for open feedback and consideration by the budget policy makers about two months before the budget is announced.
“Government must commit to fiscal discipline, minimizing its wasteful expenditures while maintaining complete transparency with a view to demonstrate to the public that their taxes are used in the most judicious manner,” the alliance said in a report. “Taxes should be few, low-rate, broad-based, predictable and wherever possible, flat. Ideally, income tax and a mild wealth tax on certain types of wealth should become the main tool of tax revenue.”
There should be no discrimination and exemptions in taxation. For example, all sources of income must be taxed equally. Those in need of specific incentives may be provided relief through other government entities.
“Presumptive taxation must be discontinued. Withholding income taxes may be allowed on salary, dividend, interest income, other incomes and payment to non-residents under the concept of pay as you receive the income,” it said. “Import taxes in general and especially for raw material should be minimized to encourage investment, production and reduce inflation. General sales tax should be reduced significantly and harmonized across the federal and provincial jurisdictions.”
Every earning individual or firm or corporate entity must file an online income tax return which is simplified to the extent that those people who cannot read/write English, should be able to file their tax returns on their own and those who need to declare additional information may be allowed over and above that. “We should encourage, and not discourage, corporatization through taxation. Compliance cost for registrations, tax payments and returns filing should be significantly reduced. Introduce a penalty (in the form of return of court fee, lawyer fee and interest payment on amount blocked) on FBR in case of degree in favour of plaintiff against FBR. No general sales tax should be collected in advance at import or manufacturing stage. Tax exemptions available on pensions and savings instruments should be withdrawn. Additionally, on the assumption that a meaningful negative tax/transfer system will be introduced, all subsidies and cross-subsidies intended to mitigate the plight of the poorer segment of the population should be removed. That is, the quantum of the negative tax/transfer should cover all the subsidies and cross-subsidies, that are dispensed through various silos within the government.”
Tax credits for innovation and research and development may be allowed only over a specific turnover of business and/or to the business associations with clear performance benchmarks and sunset clauses.