Budget 2012: Regularizing taxation
The budget for financial year 2012-2013, to be announced in MayJune, will be the present government’s fifth and last budget of its tenure and is anticipated to be people-friendly, mainly in face of the coming elections.
The Federal Board of Revenue (FBR) is optimistic about achieving its revenue collection target of Rs. 1,952 billion set for financial year 20112012. Revenue collection has already shown an impressive growth in the first eight months of the current financial year. A high revenue target has been set in view of rising oil prices that would increase tax revenues.
FBR has sought budget proposals (2012-2013) from all chambers of commerce and industry, associations and trade bodies. There are five major focus areas for Customs Budget of 2012-2013 comprising tariff rationalization, concessionary rate of customs duty for industrial sectors, amendments in the Pakistan Customs Tariff and changes in Customs Rules, Procedures and Customs Act 1969.
Taxation forms a major part of the budget planning for the year ahead. The Federal Board of Revenue (FBR) is likely to propose reduction in the corporate income tax rate from 35 percent to 32 percent or further scale it down to encourage listing of new companies at the stock exchanges in the upcoming budget. This is planned to be done in a phased manner. This measure would ensure that FBR encourages corporatization without hurting revenue collection. It would also be a strong move to bring the informal sector under the documented regime.
Muhammad Ali, Chairman, Securities and Exchange Commission of Pakistan (SECP), has pointed out that globally the tax rate on listed companies or corporate sector is low and high tax is charged from non-listed companies. Contrary to this, in Pakistan, out of 60,000 registered companies only 10 percent listed companies are making huge tax contributions while 90 percent are non-listed companies and avoid paying taxes.
However, according to Humayun Bashir, President, Overseas Investors Chamber of Commerce and Industry (OICCI), the budget proposals for 2012-2013 are balanced and aimed at broadening the tax base. In its proposal, OICCI has suggested to the government that all legal entities including individuals, association of persons and corporate and NGOS/NPOS should file annual tax returns, as well as wealth statements, irrespective of their source of income, if the total income for the year is in excess of the government approved threshold which currently is Rs. 350,000. In case the earned income falls under the exempt category then exemption may be claimed separately.
The tax proposals also include that agriculture and income from other sectors should be brought in to the tax net that would help in providing an equitable treatment to all segments of the economy. For this to happen, all venues where economic business activity takes place should be registered with the FBR.
Further, a uniform corporate tax rate of 30 percent is proposed for all businesses irrespective of their legal status. The implementation of these measures in the upcoming budget would help in encouraging corporatization and expansion of companies.