ISLAMABAD: The Finance Ministry has incorporated all the recommendations on taxation related matters moved by the Federal Board of Revenue (FBR).
These proposals include taxation of builders and land developers, withholding tax on mining, extending the liability of super tax for year, increasing cost of non-compliance with tax laws, rate of tax on securities, rationalization of withholding tax on commercial electricity bills and number of others.
According to Member Strategic, Planning, Reforms and Statistics Dr Muhammad Iqbal, FBR moved a number of proposals to the Finance Ministry related the expansion of tax base as well as increasing the revenue collections and all of them were incorporated in the federal budget 2016-17.
In an exclusive interview with Customs Today he said that all the recommendations were under discussion in both the Houses of the Parliament and hopefully get good response from the legislators. To a question about hard revenue collection target fixed for the next fiscal year, Dr. Muhammad Iqbal said that FBR had full capacity to achieve the prescribed revenue target.
When sought explanation about the recommendations moved to the finance ministry for inclusion in the federal budget by the FBR, he said that FBR had proposed minimum tax @ 1% of turnover payable by Individuals and AOPs having turnover exceeding ten million rupees.
At present he said that minimum tax on turnover was paid by individuals and AOPs having turnover exceeding fifty million rupees. A large number of Individuals and AOPs having turnover below Rs. Fifty million are filing returns yet they are not paying any tax.
“Similarly, after discussion with ABAD, final tax has been proposed on builders/ land developers on the basis of per unit area. Whereas, at present tax collection from builders and land developers does not match with the level of investment and profits accruing in construction sector” he added.
In order to expand the tax base, he said that it was proposed that a withholding tax at the rate of 5% of the value of minerals be collected from no filers by the departments of provincial governments responsible for issuing licenses for extraction of minerals and collection of royalty on the extracted minerals.
Furthermore, he observed that super tax was levied for the Tax Year 2015 to meet revenue needs for certain unforeseen expenditure by the government. Since the circumstances still persist, it is being extended for tax year 2016.
Moreover, he said that continuing with the policy of differential taxation for filer and non-filer, various sections were included with higher withholding tax rates for those not filing income tax returns. In order to encourage capital markets, it is proposed to maintain the existing tax rate for filers only. However, the tax rates for no filers are being increased.
He observed that traders were not properly contributing in tax collection therefore it was proposed to increase the adjustable withholding tax on commercial electricity bills exceeding Rs 20,000 per month to 12 percent. No increase is however proposed on industrial and residential electricity bills.
Dr. Muhammad Iqbal said that FBR had proposed Alternate Corporate Tax basis for payment of advance tax because the Advance Tax was paid on the basis of tax calculated on income or minimum tax on turnover and is required to be deposited in four instalments. However, advance tax is not calculated on the basis of Alternate Corporate Tax (ACT), but taxpayers under existing law have to pay entire tax at the time of filing of return.
He further said that FBR also proposed to extend the holding period for taxation of capital gain on sale of immovable property from two years to five years to be charged at uniform rate of tax of 10%.
He observed that FBR had proposed separate rates of tax in order to simplify taxation of property income in the case of individuals and associations of persons. Moreover it was also proposed that for such persons the property income may not be clubbed with income under other heads and may be taxed as a separate block of income.
Dr. Muhammad Iqbal was of the viewpoint that in order to encourage filing of income tax returns, FBR had proposed an advance tax at 3% of turnover of no filer service providers be collected by provincial ST authorities along with their sales tax returns. At present a large number of service providers filed sales tax returns with the provincial authorities and not filed income tax returns
Moreover, he said that FBR had also proposed minimum tax on companies declaring gross loss in order to maintain neutrality and to stop misuse of the provision. Currently companies declared gross loss was exempt from payment of minimum tax at the rate of 1% of turnover.
