ISLAMABAD: The government on Friday proposed various taxation measures for fiscal year 2015-16, with focus on broadening revenue base, bringing non-tax payers into tax net, rationalizing customs tariffs, sales tax and federal excise duty, besides incentives for construction and agriculture sectors and employment generating industries.
Finance Minister Muhammad Ishaq Dar, while presenting the budget for in the National Assembly, said “like last year, this time again the government has made conscious efforts so that the burden of tax proposals should not affect un-privileged and poor.”
“Our proposals will ensure that affluent classes and specially those who do not pay taxes, should come forward and contribute towards this national cause,” he stressed.
Finance minister said the country needed adequate fiscal space for spending more on development and welfare of its people, adding that “Our government believes in taxation in a growth paradigm. We have to enhance our efforts for resource mobilization and for having an equitable and just tax system.”
Outlining the broad principles of taxation proposals, he said that the second phase of withdrawal of exemptions will further eliminate the discriminatory tax exemptions and concessions.
He said the scheme of differential taxation for the filers and non-filers was meant for penalizing non-compliance without adding any further burden on the compliant will be expanded, adding that customs tariff will be rationalized to reduce both the number of slabs and the maximum duty rate.
Dar said tax laws and procedures to cut down on discretion would be reviewed, with the removal of sectoral distortions in domestic taxes.
He said measures were being taken for broadening of the tax base and documentation of economy, adding, the share of the direct taxes would be increased.
Giving the details of revenue measures for the next fiscal year, he said the capital gains tax for securities held up to one year and for securities held for a period between 1 and 2 years, was being proposed to increase from 12.5 percent and 10 percent to 15 percent and 12.5 percent respectively.
In addition, he said, it was proposed that securities held for a period of more than 2 years and less than 4 years be also taxed at a reduced rate of 7.5 percent.
He said that in order to promote tax culture, to discourage non-compliance with tax laws and to address the concerns of citizens paying due taxes and resultantly having higher cost of doing business than tax evaders, a distinction was created between a compliant and non-compliant taxpayer by prescribing higher withholding tax rates for those not filing their returns through Budget 2014-15.
That measure has shown good results, he said and added that continuing with the same policy, the regime of different rates for filer and non-filer was proposed to be extended on certain other transactions.
Accordingly, it is proposed that the rate of tax in the case of Non-filers be increased in the case of contractors by 3 percent, in the case of suppliers by 2 percent and in case of commission agents by 3 percent, he added.
Finance Minister Ishaq Dar said the rate of tax on non-filer transporters was also proposed to be enhanced by various percentages.
The rates in the case of non-residents may also be revised accordingly, to provide a level playing field. Any person can avoid payment of this advance tax by filing of return and can also claim adjustment or refund of this tax by filing return after the payment, he added.
About adjustable advance income tax on banking instruments and other modes of transfer for non-filers, he said it was proposed that adjustable advance income tax at the rate of 0.6 percent of the amount of transaction might be collected on all banking instruments and other modes of transfer of funds through banks, in the case of persons who did not file income tax returns.
He, however, reiterated that this provision will not be applicable on taxpayers.
Dar said for rationalizing tax rates for various sources of banking companies, the present tax rate of 35 percent applicable to banking companies from all sources except income from dividend which was taxed at various rates from 10 to 25 percent and income from capital gains which was taxed at a rate of 10 percent and 12.5 percent discriminates between different sources of income for banks.
Accordingly rate differential for different sources is proposed to be removed and income of banks from all sources is proposed to be subjected to income tax at 35 percent, he added.
He said as the present rate of tax of 10 percent on dividend income was on the lower side as compared to most other countries, it is proposed that the rate be increased to 12.5 percent.
Consequently, in case of non-filers the rate of tax was proposed to be increased from 15 percent to 17.5 percent of which 5 percent shall continue to be adjustable, he said, adding, for mutual funds the existing rate of 10 percent shall continue.
Regarding taxation of capital gains from trading of futures contracts, he said it was proposed that advance adjustable income tax at the rate of 0.1 percent on each transaction may be introduced to be collected on every purchase and sale of futures contract.
About the collection of adjustable advance income tax at a rate of 7.5 percent on domestic electricity bills above Rs 100,000, he said due to reduction in electricity prices it was proposed that the threshold be reduced to Rs. 75,000.
