ISLAMABAD: Pakistan Business Council (PBC) has strongly proposed Finance Minister Muhammad Aurangzeb to implement steps taken by the Indian government for the documentation of the economy in the coming budget (2024-25).
The PBC has also proposed to considerably raise withholding tax rates for non-filers, re-launch the point of sales (POS) prize scheme, revisit the Federal Board of Revenue (FBR) values of immovable properties to reflect actual market values and revisit tax rates on agriculture sector under the provincial laws on the basis of land area.
In a communication to Finance Minister Aurangzeb, the PBC proposed that a majority of retailers/street vendors are not accepting payment through debit/credit in Pakistan. Mobile wallet apps are widely used for digital payments including transactions with street vendors in India. These wallets offer convenience and security making them popular among consumers and vendors alike.
Many street vendor associations and organisations have partnered with payment service providers to facilitate digital payments. This includes providing vendors with POS devices, QR Code stickers and training on using digital payment methods.
The PBC has proposed that as per the Islamabad Capital Territory Ordinance, rate of sales on services rendered by restaurants in Islamabad is reduced by five percent in case payment is made through credit cards. Similar law should be applied for goods and the rate of sales tax be reduced to 13 percent (from 18 percent) in case of payment through credit cards. This will encourage customers to force suppliers to accept payment through credit cards.
The PBC has said that the government should consider out-of-the-box solutions for increasing the contribution of the undocumented sector to tax collection in Pakistan.
There appears to be a serious discrepancy between the reported news items and the number of income tax and sales tax filers. As of June 30, 2023, there were 177 million bank accounts in Pakistan. There are more than four million industrial and commercial utility connections, however, registered sales tax filers are around 200,000. Out of these 200,000, only around 41,000 are making payments along with their monthly sales tax returns.
Reportedly, the number of registered vehicles was reported at 7,020,803 units in December 2022.
As per leading websites providing data on properties, properties are available for rent and sale in leading cities of Pakistan including Karachi, Islamabad and Lahore.
All referred data is not reconcilable with the number of taxpayers in Pakistan and therefore, the PBC has requested to consider proposals for broadening the tax base.
The PBC has proposed that the concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy. Though large amounts are being collected from non-filers, no effort has been made to increase the tax base. Filers are paying taxes up to 35 per cent of their income in addition to super tax of up to 10 per cent and when leftover income is used for personal expenses or for the purchase of any asset, they also pay advance tax.
On the other hand, non-filers do not pay any tax on their income and the withholding tax applicable on transactions executed by them or assets purchased by them is not much when compared with rates applicable to filers. The non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers. In order to encourage non-filers to get themselves registered under the tax net, tax rates should be increased to such an extent that they are encouraged by force to get themselves registered.
The PBC has proposed that at present there is a wide difference in actual values of land/immovable properties with value fixed by the FBR. The FBR values should be revisited to reflect actual market value to discourage the parking of black money in the real estate sector.
The retailers/wholesales, who are not in the tax net are afraid of unfair proceedings by the FBR officials. The law should be amended to encourage new taxpayers to get themselves registered with the POS by allowing benefits and incentives. The FBR should absolve newly POS-integrated retailers from all sorts of tax audits/proceedings at least for the preceding as well as subsequent three years. The sales tax should be reduced to 14 percent for all PSO-integrated retailers of all sectors, the PBC proposed.
The PBC has also proposed that the tax rates on the agriculture sector, under the provincial law, on the basis of land area, must be revisited to reflect changes in the income potential from land due to efficiencies/output growth in the agriculture sector.
Even though agriculture income is not subject to income tax; however, income tax returns and wealth filing under the federal income tax law must be made mandatory for all agriculturists, failing which, the federal income tax law should be made applicable to them.
The PBC proposed to leverage the NADRA database, which holds the identification data of all Pakistanis, the PBC added.
ISLAMABAD: Pakistan Business Council (PBC) has strongly proposed Finance Minister Muhammad Aurangzeb to implement steps taken by the Indian government for the documentation of the economy in the coming budget (2024-25).
The PBC has also proposed to considerably raise withholding tax rates for non-filers, re-launch the point of sales (POS) prize scheme, revisit the Federal Board of Revenue (FBR) values of immovable properties to reflect actual market values and revisit tax rates on agriculture sector under the provincial laws on the basis of land area.
In a communication to Finance Minister Aurangzeb, the PBC proposed that a majority of retailers/street vendors are not accepting payment through debit/credit in Pakistan. Mobile wallet apps are widely used for digital payments including transactions with street vendors in India. These wallets offer convenience and security making them popular among consumers and vendors alike.
Many street vendor associations and organisations have partnered with payment service providers to facilitate digital payments. This includes providing vendors with POS devices, QR Code stickers and training on using digital payment methods.
The PBC has proposed that as per the Islamabad Capital Territory Ordinance, rate of sales on services rendered by restaurants in Islamabad is reduced by five percent in case payment is made through credit cards. Similar law should be applied for goods and the rate of sales tax be reduced to 13 percent (from 18 percent) in case of payment through credit cards. This will encourage customers to force suppliers to accept payment through credit cards.
The PBC has said that the government should consider out-of-the-box solutions for increasing the contribution of the undocumented sector to tax collection in Pakistan.
There appears to be a serious discrepancy between the reported news items and the number of income tax and sales tax filers. As of June 30, 2023, there were 177 million bank accounts in Pakistan. There are more than four million industrial and commercial utility connections, however, registered sales tax filers are around 200,000. Out of these 200,000, only around 41,000 are making payments along with their monthly sales tax returns.
Reportedly, the number of registered vehicles was reported at 7,020,803 units in December 2022.
As per leading websites providing data on properties, properties are available for rent and sale in leading cities of Pakistan including Karachi, Islamabad and Lahore.
All referred data is not reconcilable with the number of taxpayers in Pakistan and therefore, the PBC has requested to consider proposals for broadening the tax base.
The PBC has proposed that the concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy. Though large amounts are being collected from non-filers, no effort has been made to increase the tax base. Filers are paying taxes up to 35 per cent of their income in addition to super tax of up to 10 per cent and when leftover income is used for personal expenses or for the purchase of any asset, they also pay advance tax.
On the other hand, non-filers do not pay any tax on their income and the withholding tax applicable on transactions executed by them or assets purchased by them is not much when compared with rates applicable to filers. The non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers. In order to encourage non-filers to get themselves registered under the tax net, tax rates should be increased to such an extent that they are encouraged by force to get themselves registered.
The PBC has proposed that at present there is a wide difference in actual values of land/immovable properties with value fixed by the FBR. The FBR values should be revisited to reflect actual market value to discourage the parking of black money in the real estate sector.
The retailers/wholesales, who are not in the tax net are afraid of unfair proceedings by the FBR officials. The law should be amended to encourage new taxpayers to get themselves registered with the POS by allowing benefits and incentives. The FBR should absolve newly POS-integrated retailers from all sorts of tax audits/proceedings at least for the preceding as well as subsequent three years. The sales tax should be reduced to 14 percent for all PSO-integrated retailers of all sectors, the PBC proposed.
The PBC has also proposed that the tax rates on the agriculture sector, under the provincial law, on the basis of land area, must be revisited to reflect changes in the income potential from land due to efficiencies/output growth in the agriculture sector.
Even though agriculture income is not subject to income tax; however, income tax returns and wealth filing under the federal income tax law must be made mandatory for all agriculturists, failing which, the federal income tax law should be made applicable to them.
The PBC proposed to leverage the NADRA database, which holds the identification data of all Pakistanis, the PBC added.
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