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Agri income tax in next budget Shaukat lays down 9-point agenda for

tax reforms

WIRASAT HUSSNAIN

KARACHI: Federal Finance Minister Shaukat Aziz on Friday night laid down a nine-point, broad-based agenda for tax reforms and said that in the next year's budget agriculture income would be taxed, as nearly as possible on the same basis as any other income in the country.

Aziz was speaking as chief guest at the annual dinner of the Income Tax Bar Association (ITBA), Karachi, at a local hotel. Besides office-bearers and members of the ITBA, officials of the Central Board of Revenue, chiefs of the commerce and industry bodies and representatives of various professional associations were also present.

He said a retired judge of the Supreme Court, to be appointed as 'Tax Ombudsman', has been selected and his name would be announced next week, and 'Fiscal benches' in superior courts would be established to expeditiously settle tax disputes.

The minister said the government intends to collect Rs 100 billion to Rs 130 billion in additional tax revenue by increasing tax-GDP ratio from existing 12.4 percent to 13 to 14 percent.

"Now, if we take 13 to14 percent the desired tax effort on the part of the CBR, we are talking of adding 3 to 4 percentage points in our tax collection. At the present level of GDP of Rs 3.3 trillion, this will translate to Rs 100 billion to Rs 130 billion in additional tax revenue," he said.

Comparing Pakistan's performance with other countries in the region, the minister said: "We find ourselves in an unenviable last position."

He said: "While we are nowhere near countries like Sri Lanka and Malaysia that have tax to GDP ratio close to 20 percent, our performance is not matched even with Thailand (16.1 percent) and Indonesia (14.7 percent)."

He said it was the unsatisfactory state of tax collection effort that was a serious cause of concern. "So long as this is not addressed, commensurate with our desire to accomplish higher rates of growth, there is no hope that we can put our economy on a sustainable path of economic development, and regain our economic sovereignty," Aziz said.

The minister said a major distortion in the country's tax administration was the income from agriculture that 'enjoys exemption from federal income tax' on account of being a provincial subject.

"As we have announced, with effect from the next budget agriculture income will be taxed, as nearly as possible, on the same basis as any other income in the country," Aziz said.

He listed salient features of the agenda and said that total documentation of the economy, once for all, tax amnesty scheme, property surveys, anti-smuggling measures, tax on agriculture income, reduction in number of taxes, simpler assessment procedures, timely refund and set-off, and efficient system of dispute resolution "are the core issues" to be addressed.

Aziz said: " This is the agenda of tax reforms that we have formulated to address the problems of taxation in Pakistan."

He said it was a balanced agenda as it laid responsibility on each of the stake-holders in the tax equation.

The minister said during the currency of the amnesty scheme, "we are carrying out" property surveys, in major cities of the country, to ascertain the antecedents of their owners including their tax records. Those who are still lacking a tax record would like to take advantage of the amnesty scheme or risk penal action that would inevitably be forthcoming on the expiry of the scheme, he added.

Aziz said there would be no more 'whitener' schemes, and the chance given now was final. "There will be no second chance," he added.

He said: "We have announced the amnesty to afford people a final opportunity to voluntarily bring themselves into the tax net by declaring their concealed incomes and assets and paying a small tax of 10 percent. There would be no second chance."

He said while closing the loopholes and leakage, "we are conscious of the need" to simplify the overall tax regime. There would be 'primarily' three taxes at the federal level Ñ income tax, customs and sales tax. "All other taxes will gradually be phased out," he added.

The minister said while moving in the direction of self-assessment scheme, the government was devoting attention to developing industry-specific assessment procedures so that the level of discretion in tax assessment could be gradually reduced.

"Presently, we plan to cover cement, textiles, sugar and beverages under this regime. This would be gradually extended to other sectors as well," he said.

He said there was no moral justification on the part of tax officials to withhold funds beyond a reasonable period.

Aziz said payment of approved returns within the stipulated period has already been allowed, failure of which would entail the assessee to claim a return on the amount due. "Similarly, approved refunds can be used against settlement of tax liabilities outstanding against the tax payer."

He said to have an efficient system of dispute resolution, two measures have been designed Ñ tax ombudsman would be appointed to deal with complaints against authorities, and fiscal benches in superior courts would be established to expeditiously settle disputes.

The minister said smuggling "is one of the most damaging sources" of tax leakage for which the government have approved a broad-based anti-smuggling programme that would entail the following:

Ñ Major smuggling points, like Mekran Coast, Pak-Iran and Pak-Afghan borders, Karachi coastline, airports and dry ports would be choked;

Ñ the scope of Afghan Transit Trade would be rationalised;

all civil/armed forces and coast guards would be used to curb smuggling at borders and coast lines; and,

Ñ an amnesty scheme would be offered, for three months, to markets that sell smuggled goods, particularly Bara markets, to legalise their goods on payment of duty, otherwise the goods would be confiscated.

ITBA President Abdul Wahid Tejani, APITBA President Z. H. Jafri, ITBA, General Secretary Ali Rahim, and ITBA Vice President Abdul Jabbar Qazi also spoke on the occasion.

Tejani, in his address of welcome, spoke at length about rampant corruption, delay in tax cases, payments, settlement of disputes, and inconsistency of government's economic and fiscal policies. He suggested inclusion of ITBA representative in taxation policy planning committees of the government.

Jafri suggested that income tax refunds be directed to be credited to the assessee's bank account in the same manner in which bank accounts are attached, frozen and due taxes are recovered.

Among those who attended the programme were Chairman Central Board of Revenue Riaz Hussain Naqvi, Chairperson Income Tax Settlement Commission Parveen Qadir Agha, Member Income Tax Mansoor Ahmed, President Institute of Chartered Accountants of Pakistan Shoukat Amin Shah, President High Court Bar Association Abul Inam, President Karachi Bar Association Mohammed Amin Lakhani, President Institute of Cost and Management Accountants of Pakistan M. H. Asif, Regional Commissioner of Income Tax Corporate Region Akhtar Nazar Mian, Regional Commissioner of Income Tax Southern Region Mohammed Shafi Malik, President Pakistan Taxation Club Mumtaz Ahmed, President FPCCI Fazlur Rehman Dittoo, President KCCI Amjad Rafi, President KSE Arif Habib, President Memon Professional Forum Yaqoob Thara, President Pakistan Junior Chamber Anwer Kashif Mumtaz, and First Lady of the ITBA Yasmin Tejani.