KARACHI - Although the budgetary measures for the fiscal year 2015-16 announced by the Finance Minister Ishaq Dar have major relief measures for the agricultural and corporate sectors and for the industries in Khyber Pakhtunkhwa, the budget has brought additional burden of indirect taxes and further squeeze on the compliant tax payers particularly the trade and industry which is based in Karachi and contributes 65pc of total tax revenue.
In a statement issued by Karachi Chamber of Commerce and Industries said, the budget totally lacks any measures to support the SME’s which contribute 37pc to the GDP and employs nearly 1/3rd of Pakistan’s adult population.
On the positive side, FBR has been deprived of powers to issue exemptions under various provisions and these powers have been transferred to the parliament. This to some extent will plug the leakages and reduce the level of inherent corruption associated with such powers.
Unfortunately, the recommendations of KCCI, which represents the largest number of tax payers in the country, have by and large been ignored in the budget 2015-16, particularly the most important demand of the business community to repeal or amend the draconian provisions in the Sales Tax, Income Tax and Customs laws to curtail the absolute discretionary powers of the officers of Inland Revenue, which are used as tools of harassment and extortion. Such laws are the main hurdle in broadening of tax base which remains and will continue to remain below 1pc of the population.
Rather than providing relief to existing compliant tax payers, government has relied again on increasing the indirect taxes such as GST, Income Tax and FED across the board, instead of taking effective steps to broaden the tax base by netting the big fish. Existing basic rate Sales Tax of 17pc has been effectively increased up to 22pc by increasing the rate of additional tax from 1pc to 2pc on the sales made to unregistered persons.
The KCCI therefore suggests that stakeholders should be consulted before implementation of 0.6pc of this new tax on banking transactions and instruments, in order to clarify various queries and implications arising out of the new taxation measure.
Introduction of Section 165B in the Income Tax Ordinance is in sharp contrast with the economic vision of the present government. The measure provides authority and access to the FBR to the foreign currency accounts of Non-Resident Pakistanis and pursue them for information on sources of such funds and to recover tax revenue where applicable. This provision is likely to cause greater damage than achieve any significant recovery of tax revenue. Rather it will cause panic among the account holders and result in flight of capital. KCCI therefore suggests to withdraw the new provisions under 165B as well as section 165A inserted last year.