Tax simplification regime, says chief of FBR

Islamabad (News Alert Report)
With a taxman in control of federal borad of revenue, the tax authority chief Shabbar Zaidi is reported to have made up his mind asking the fellow members of taxes to have simplified ‘intense’ tax regime making possible expansion of tax bubble. Zaidi, it is recalled is from private sector audit firm Ferguson.
The tax authorities have also proposed simplified income tax regimes for educational institutions, jewellers, small-sized firms and builders in the new budget and may offer them to pay lower than standard income tax rates aimed at bringing them into the tax system.
In slow and shallow economic activities, one may say, the purpose of making business and professional specific special tax regimes is said to be helping them comply with the law and also pay at least some taxes as against almost nil contributions however one leading businessman recalled the so called tax net expansion by Musharraf-Shaukat Aziz regime that miserably failed.
“The government is actively discussing the special tax regimes for educational institutions, hospitals, beauty parlours, small and medium enterprises (SMEs), builders, developers and jewellers,” said FBR Chairman Zaidi while talking to Tribune. The purpose of the budget proposal is to facilitate these businesses and professionals in doing their business and at the same time bringing them into the tax system.

The government may propose lower than standard income tax rates for all these sectors with an incentive to pay even less tax in terms of percentage by claiming less expenses in their income tax returns.
At present the corporate and individual income tax rate is 29% and the government has a plan to increase the individuals’ rates to 35%. These sectors and professions may be asked to pay only one kind of tax and could be exempted from the sales tax and federal excise duty.
There are nearly two million people and companies that have filed their annual income tax returns for the last year. But due to almost 12-dozen types of withholding taxes, more than 50 million people in Pakistan pay taxes –a factor that has been ignored in public discourse.
In order to give a boost to the housing sector, the government also wants to introduce a special tax regime for the builders and the developers. These people hardly contribute anything to the exchequer and their tax payments are going down over the years.
There are already nine special schedules in the Income Tax Ordinance of 2001 –a figure that may jump to at least 13 after presentation of budget on June 11 for fiscal year 2019-20.
In January this year, in his capacity as member of the government’s Tax Reforms Implementation Committee, had proposed the special taxation regime for the SME sector. But at that time the FBR had given him a cold shoulder.
The TRIC had suggested a 20% income tax rate for the SME sector but then the tax machinery had reservations over creating another special regime and its implications for revenues in the short term.
The SME has been defined as a firm that has a turnover of less than Rs60 million, the capital not more than Rs50 million, the cost of fixed assets not more than Rs50 million and the number of employees not more than 50 persons.
It had also been proposed that the provisions of Sales Tax Act, 1990 and Federal Excises Act, 2005 should not apply to persons whose income is chargeable to tax under the new SME regime.
The purpose of making business and professional specific special tax regimes is said to be helping them comply with the law and also pay at least some taxes as against almost nil contributions, they added.
“The government is actively discussing the special tax regimes for educational institutions, hospitals, beauty parlours, small and medium enterprises (SMEs), builders, developers and jewellers,” said FBR Chairman Shabbar Zaidi while talking to The Express Tribune.
Zaidi said the purpose of the budget proposal is to facilitate these businesses and professionals in doing their business and at the same time bringing them into the tax system.
The government may propose lower than standard income tax rates for all these sectors with an incentive to pay even less tax in terms of percentage by claiming less expenses in their income tax returns.
At present the corporate and individual income tax rate is 29% and the government has a plan to increase the individuals’ rates to 35%. These sectors and professions may be asked to pay only one kind of tax and could be exempted from the sales tax and federal excise duty.
There are nearly two million people and companies that have filed their annual income tax returns for the last year. But due to almost 12-dozen types of withholding taxes, more than 50 million people in Pakistan pay taxes –a factor that has been ignored in public discourse.
In order to give a boost to the housing sector, the government also wants to introduce a special tax regime for the builders and the developers. These people hardly contribute anything to the exchequer and their tax payments are going down over the years.
There are already nine special schedules in the Income Tax Ordinance of 2001 –a figure that may jump to at least 13 after presentation of budget on June 11 for fiscal year 2019-20.
In January this year, Zaidi, in his capacity as member of the government’s Tax Reforms Implementation Committee, had proposed the special taxation regime for the SME sector. But at that time the FBR had given him a cold shoulder.
The TRIC had suggested a 20% income tax rate for the SME sector but then the tax machinery had reservations over creating another special regime and its implications for revenues in the short term.
The SME has been defined as a firm that has a turnover of less than Rs60 million, the capital not more than Rs50 million, the cost of fixed assets not more than Rs50 million and the number of employees not more than 50 persons.
It had also been proposed that the provisions of Sales Tax Act, 1990 and Federal Excises Act, 2005 should not apply to persons whose income is chargeable to tax under the new SME regime.

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