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FPCCI's budget proposals

RECORDER REPORT

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) while welcoming the assurance that agricultural incomes will be taxed on the same lines as incomes from any other source, has expressed fear that the involvement of provincial governments in designing the mechanism will not achieve the desired results.

This is one of the major suggestions contained in the draft budget proposals for federal budget 2000-2001 prepared by the FPCCI under the guidance of Amjad Rafi, chairman of the FPCCI committee on tax.

It has, therefore, been suggested that the Central Board of Revenue may formulate the policy for implementation by the provincial governments.

On the tax reforms, it said that no system of taxation could work successfully unless the tax-payer has the satisfaction that the taxes paid by him were being judiciously used by the government. This satisfaction would give rise to assurance that the tax-payer was paying his due share of taxes honestly and scrupulously. The legacy of coercion and extortion inherited by us from the days of colonial rule has got to be done away with, and the sooner, the better.

Taxes (whether direct or indirect) should be levied on those sectors only which have the capacity to pay. The ratio of tax to income, or accrual benefit, should be reasonable and equitable. If the ratio is unreasonable, it would breed a tendency to tax evasion. Tax ratio should be broad-based to infuse a sense of participation.

Tax laws have got to be simplified and streamlined, especially in a society like ours where the rate of literacy is on the lower side. Complicated laws and rules would only add to ambiguity and confusion. The system has got to be pragmatic under given circumstances.

Businessmen are paying 67 kind of different federal, provincial and local taxes. Most of their time is spent in dealing with this large number of departments and they cannot pay proper attention for expansion of their business. It is suggested that the number of taxes may be reduced suitably.

On documentation of economy, it said that it has become a bone of contention. Documentation is essential because it is the demand of the new millennium. The plea of inability to issue cash memos or sales voucher on the pretence of "illiteracy" does not hold any water any longer. Without documentation of economy no planning or finance management worth the name is possible at the national level. The present government has pledged to curb these loopholes with a stern hand. Over and above the administrative and punitive measures, the following special "incentive package" is suggested in favour of documentation.

Those firms who conduct all their transactions through bank documentation, may be given a tax relief of 25 percent as a special incentive.

Those firms who maintain regular accounts, whether through bank or cash, may be given the facility of assessment at slab rates.

"No account cases" may be charged income tax at the rate of 25 percent more than the slab rates.

The sanctity of cheque be ensured so that there is no hesitation in accepting payments through cheque.

Our next budget should concentrate on: Stimulating production activities in the country, emphasis on production and export of value added items, special incentives for development of industry and agriculture, rationalisation of taxation policy in such a way that it encourages production and is simple and easy for the tax-payers, and stability in prices.

It has been suggested that the exemption limit of income tax may be revised upward. Presently the exemption limit for non-salaried earning members of our society is Rs 50,000 per year while those for salaried class and working ladies is Rs 55,000 and Rs 60,000 respectively. But for all practical purposes, this limit is extremely inadequate. An earning member of our society who has to support a family of 3 to 5 members cannot provide the basic necessities of life to all the members with an income of Rs 50,000 per year. In view of the rising cost of living, the exemption limit may be raised to Rs. one lakh. In the same manner super tax slabs for registered companies should also be revised. In case of private limited companies, the rate of income tax plus super tax should be fixed at 30 percent while in case of banking companies and public limited companies, it should be 25 percent and 30 percent respectively.

Suggestions have also been made on sales tax, wealth tax and custom.