KARACHI: The federal government has been asked to give relief to income tax returns filers in withholding tax rates in the upcoming budget.
In order to avoid revenue shortfall, the Institute of Chartered Accountants of Pakistan (ICAP) has also recommended the government to increase burden of taxes on non-filers to attract registration and filing.
In its proposals for budget 2018-19, the institute said that the corporate sector was neglected due to extreme abrupt tax collection measures taken by the government in order to cater annual budget targets.
The service, whole sale/retail, transport and the agriculture business sectors are still not fully documented, hence their contribution to the national exchequer is extremely low and most of them are out of the tax net. Even more than three million persons having commercial electricity connections are hardly into the tax net.
By charging nominal additional tax and creating narrow difference in tax deduction of Filers and non-Filers, the government failed to attract unregistered persons to get themselves registered.
The ICAP recommended that tax collection / deduction rates for filers should be reduced. In order to avoid shortfall in withholding tax collection and to generate more tax revenues, tax rates for non-filers be increased to maximum possible extent generally for all and specifically for following sections where tax deduction rates for Filer and Non-Filers are same at present:
— u/s 155 on rental income (received by individuals and AOPs)
— u/s 235 on commercial and industrial electricity bills
— u/s 236B and 236L on purchase of air ticket
— u/s 236D on functions and gatherings
The institute recommended that all exemptions / tax concessions (like exemption on agricultural income) provided under the law should only be available to return filers.
Condition of being filer may be made mandatory for connection of commercial/ industrial utilities.
Information regarding ownership of vehicles of engine capacity over 1300cc, and sale/ purchase of immovable properties should be collected for bringing into tax net.
Immovable property transfers in designated areas having high value should mandatorily require Filer status for seller and purchaser.
For purchase/ registration of car of 1300cc and above, status of Filer to be made mandatory.
A company can deal only with Filer. All stakeholders like manufacturer, trader, importer, distributor, wholesalers and retailers dealing with big corporations like National and
Multination companies, in any capacity for goods or services must be filer under Income Tax Law. Sales Tax registration should also be made compulsory to qualify for any business with Government. A company would not do any business with any non-filer.
In case of provisional registration as above, utility companies be directed to issue show cause notices where annual billing amount exceeds Rs. 2.4 million and directing provisionally registered persons to obtain permanent registration. In case of non-compliance, utility companies be directed to disconnect utility connections.
Similarly, In terms of SRO 509(I)/2013 dated June 12, 2013, unregistered persons having industrial or commercial undertaking and whose bill amount, in any month, exceeds Rs.15,000 be charged with extra tax at the rate of 5% on supply of electric power and natural gas.
In order to induce people to get themselves registered, rate of extra tax be increased to 15 percent from 5 percent as present rate is too low.
After collection of extra tax as referred above for a continuous period of 6 months, all these connections should be provisionally converted into NTN and STRNs and return filings from these connections should be enforced.
