FBR Likely To Raise Salaried Sector Tax To 25 Percent
Wednesday, April 27, 2011
This refers to the news item published on 25th April, 2011 in the Business Recorder with the heading ’FBR likely to raise salaried sector tax to 25 percent’. In the details this news item has been associated with the proposals given by the Institute of Chartered Accountants of Pakistan. This news item is based on Para 1.3 of the Budget Proposals of the Institute of Chartered Accountants of Pakistan which has been misunderstood and reported incorrectly resulting into a negative perception.
In fact, the Institute’s recommendation is not to increase the maximum tax rate applicable to Salaried Individuals (as reported) but to remove the disparity of the rates of tax on income of Non-Salaried Individuals by rationalizing the tax bands, enhancing the threshold of the maximum tax rate of 25% from Rs. 1,500,000 to Rs. 3,000,000 and to provide for the marginal relief as applicable in case of Salaried Individuals.
For your information a Corrigendum has been published by the Business Recorder today, for the rectification of the above as under:
This refers to the news item published in Business Recorder on April 25, 2011 titled "FBR likely to raise salaried sector tax to 25 percent". In the details this news item has been attributed to the proposals given by the Institute of Chartered Accountants of Pakistan (ICAP).
This news item is based on Para 1.3 of the budget proposals of the ICAP, which has been misunderstood and reported incorrectly.
In fact, the Institute's recommendation is not to increase the maximum tax rate applicable to salaried individuals but to remove the disparity of the rates of tax on income of non-salaried individuals by rationalizing the tax bands, enhancing the threshold of the maximum tax rate of 25 per cent from Rs. 1,500,000 to Rs. 3,000,000 and to provide for the marginal relief as applicable in case of salaried individuals.
It was incorrectly reported due to the misunderstanding of the ICAP budget proposals which in fact has recommended that the tax rate for non-salaried individuals should be rationalized to provide relief at par with that of the salaried individuals by increasing threshold for levy of maximum tax rate of 25 per cent from taxable income of Rs. 1,500,000 to Rs. 3,000,000 and to also provide marginal relief as in case of the salaried individuals. The original text of the ICAP proposals is reproduced hereunder:
"Discrimination of salaried and non-salaried persons by providing for separate tax rates is against the norms of personal taxation". "This clearly indicates that the law itself admits that non-salaried persons understate their income". "It is very odd that: A salaried person attracts the maximum tax rate of 20 per cent where the income exceeds Rs. 4,550,000 as compared to a non-salaried person who attracts the maximum tax rate of 25 per cent where the income exceeds Rs. 1,500,000; and a salaried person is allowed a marginal relief where the income marginally exceeds from a particular slab of income and tax thereon whereas a non-salaried person is not allowed any such relief.
Therefore, it is recommended that, "huge gap in maximum tax rate should be narrowed by expanding the non-salaried tax bands so that the maximum tax rate of 25 per cent starts at least from income above Rs. 3,000,000. "Non-salaried persons should also be allowed to claim marginal relief where the income marginally exceeds from a particular slab of income and thereon".
PAC Alumni Association - President Message
Monday, April 18, 2011
Alumni Associations provide a platform for cherishing good old memories among friends and help them in their intellectual and professional development and career growth.
PAC's Alumni comprises of over 100,000 Chartered Accountants, Certified Accountants, Certified Information System Auditors and other professionals working in industry and in professional organizations.
Continuing the tradition, PAC Alumni Association had been established and its first get together was held in Royal Palm Club Lahore on 7 May 2010 and second one on 25 Sep 2010 at our ACCA Campus. Both the events were attended by some of the Alumni with their families.
I also invite you, as a distinguished alumni to be a part of this social community. Benefits among other include:
1-Get together of alumni and their families.
2-Participating in continuing professional development activities.
3-Participating in activities aimed at development of less privileged segments of society.
4-Assistance in job placement and finding suitable staff (where applicable).
To do the needful, my colleague Mr. Farooq Zafar will contact you to register you as permanent member.
I would also urge to forward my request of registering for PAC Alumni Association to all the alumni known to you. No wonder, in the process, you may be contacted by someone else for the same. Please also keep Mr. Farooq Zafar in the loop (his contact address is available to CC of this email).
You may forward him the names, contact no. or e-mail addresses of your friends for the needful.
I look forward to welcome you to PAC Alumni Association.
PAC Alumni Association
Skewed Taxation Policy
Wednesday, April 13, 2011
THE State Bank of Pakistan is worried over what Governor Shahid Kardar describes as a ‘structural shift’ of incomes towards the untaxed sectors.
“With this shift of incomes away from the tax-paying sectors to non-tax paying sectors, the tax-to-GDP (gross domestic product) ratio is structurally destined to be hovering around lower levels,” he told Reuters in an interview last week.
Experts estimate that an additional amount of Rs300 billion has shifted to the rural economy in the last one year on the back of rising global commodity prices. This trend is likely to continue for some time to come, according to some commodity experts. Yet the incomes from agriculture remain out of the tax net.
Pakistan’s economy has shown signs of improvement, according to him. But, Mr Kardar says, quick steps are needed to broaden the tax base to benefit from the growth in the untaxed sectors, such as agriculture. Like many others, Mr Kardar is also of the view that the structural shift now needs to be addressed in the next budget. “All sectors of the economy need to be taxpayers beyond a certain level of income irrespective of its source,” he emphasises.
The government appears to be cognizant of the need to increase its revenues and is reported to be considering various proposals for boosting taxes. Its finance managers have already indicated a strong “resolve” to implement the reformed general sales tax (RGST) regime in the next budget to replace the existing sales tax system.
Some media reports suggest that the government is also contemplating re-imposition of wealth tax, which was withdrawn by the previous government under Gen Pervez Musharraf.
The Federal Board of Revenue (FBR) has already made certain moves to tax the agriculture supply chain by bringing ‘arhtis’ or middle-men into the net. Last month it also withdrew sales tax exemptions to some agricultural inputs like fertilisers and tractors.
Now it wants the provinces to tax income from agriculture, effectively and directly. The rupee value of the agricultural goods produced during the last fiscal also grew to over Rs3 trillion and has stoked demands from different quarters to tax the income of big landholders.
The government also announced a few tax measures last month to collect additional revenues of Rs53 billion during the last quarter of the current financial year in order to restrict its ballooning fiscal deficit to less than 5.5 per cent. The experts, nevertheless, do not find the “temporary” tax measures adequate enough to stabilise the sliding economy.
They are of the opinion that the government needs to do a lot more in the next budget to show its seriousness to put the economy back on the road of growth. “While it is important to tax the agriculture sector in view of the rising rural incomes on account of escalating global commodity prices, it will not be enough to overcome our revenue woes,” according to Mr Mubashir Bashir, a chartered accountant from Lahore.
He says the successive governments have created incentives for tax evaders and avoiders to protect the financial interests of the wealthy. “Our tax policy is heavily skewed in favour of the rich and powerful segments of society.
It rewards and protects tax evasion and avoidance rather than punishing it,” argues Mr Bashir. “No effort for a sustained increase in the tax revenues will succeed without taxing every untaxed or partially taxed sector (including all the services and property), abolishing tax exemptions to incomes from certain sources, withdrawing tax incentives to some sectors and getting rid of money whitening schemes,” according to him. He argues that the distortions created by the elite in the tax system to protect its interests have been responsible for the increased incidence of taxes on the lower income segments of the population over the years.
The government’s inability to tax the wealthy because of their political clout has resulted in the mushrooming of indirect taxes, which ultimately hit the salaried and poorer classes, he insists. “Thus, the government is required to undertake a serious exercise to revamp the tax system in order to tax the incomes of the wealthy directly and irrespective of the source of their income to boost the contribution of the direct taxes to the overall tax revenues as well as to remove distortions that ultimately hurt the poorer and middle classes,” he says.
“A fair and equitable system taxes people according to their capacity to pay. If it does not, it means something is terribly wrong with it. And something is terribly wrong with our tax system and it needs to be fixed immediately.”