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Tuesday March 19, 2024

FBR proposed to widen tax difference between filers, non-filers

By Shahnawaz Akhter
March 25, 2018

KARACHI: Accountancy body Institute of Chartered Accountants of Pakistan (ICAP) on Saturday proposed the government to reduce withholding tax rates for income tax return filers and increase them for non-filers.

“By keeping narrow difference in tax deduction for filers and non-filers the government failed to attract unregistered individuals to get registered (with the tax authorities),” the ICAP said in budget proposals for the next fiscal year of 2018/19. “Any shortfall in revenue following the reduction in tax rates for filers should be compensated by increasing the rates for non-filers.”

The institute said the successive governments have been neglecting corporate sector, which is the most documented segment of the economy, by taking tax measures to meet the annual budget targets. “The service, wholesale/retail, transport and the agriculture business sectors are still not fully documented, hence their contributions to exchequer are extremely low and most of them are out of the tax net.”

ICAP said all the tax exemptions and concessions (like exemption on agricultural income), provided under the law, should be available for return filers only. It demanded further measures to expand the tax base, plug revenue leakages and improve documentation/registration.

The institute advised the government to revise tax on monthly gas and electricity consumption by industrial and commercial consumers to 15 percent from the existing five percent. It said not all the three million individuals having commercial electricity connections are into the tax net. The tax should be applicable for the six-month period. The returns filing condition may be made mandatory for getting electricity connection by commercial and industrial users.

The accountancy body said tax authorities should gather information about ownership of vehicles with engine capacity of over 1,300cc and sale/purchase of properties to bring untaxed people into the tax net. Estate sellers as well as buyers should be required to file returns in order to transfer properties, it added. This condition should also be made mandatory when one buys 1,300cc car and applies for transfer.

ICAP further proposed that a company should be bound to deal only with return filers. Corporate sector should ensure that manufacturers, traders, importers, distributors and wholesalers it is dealing with must file returns under the income tax law. Sales tax registration should also be made compulsory for any business to undertake any venture.