Bud­get 2012: Reg­u­lar­iz­ing tax­a­tion

Enterprise - - Snapshot -

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.

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