KARACHI: The Pakistan Tax Bar Association (PTBA) has recommended abolishing minimum tax in case of individuals and Association of Persons (AOPs) for two years in its proposal for budget 2020/2021 considering the adverse impact of COVID-19.
In its proposal, the apex tax body also proposed the reduction of the minimum tax to 0.5% for corporate entities besides suspending super tax.
Zeeshan Merchant, advocate high court, while presenting the proposals on behalf of the PTBA, highlighted that the businesses activities across the world including in Pakistan, virtually shut down due to the new coronavirus pandemic.
“In order to revive business and economy, the country needs to consider facilitation measures, including reduction of the corporate tax rate to 25% and in case of small companies this rate should be brought down to 20%.”
It was recommended that the basic threshold for salaried persons of Rs1.2 million should be restored as it was available in the tax year 2016.
Merchant, who has also served as vice president of Karachi Tax Bar Association, recommended allowing direct tax deductions for donations, including tax due under minimum and final tax regimes, given to COVID-19 funds established by the federal and provincial governments and some established approved non-profit organisations like SUIT, Indus Hospital, Edhi etc.
For broadening of the tax base, the Federal Board of Revenue (FBR) has been advised to extract information from withholding statements, details of government supplies and maintain a database of third party information.
“Conduct the data mining and data analysis to generate a complete profile for cross verification of data of the existing taxpayers as well as discovery of new taxpayers.”
The FBR has also been recommended to make mandatory the CNIC, NICOP and passport for purchase of any moveable or immovable properties, assets and major expenditures.
The PTBA proposed revamping withholding tax regime for ease of doing business. It is recommended that the withholding tax regime should be simplified by reducing the categories of withholding taxes and rates.
The withholding agents should be given an incentive in the form of a tax credit for facilitating the government withholding/collecting taxes and in identifying potential tax evaders.
“The government departments including defence should pay the tax withheld of FBR IRIS instead of book adjustment.”
It highlighted that income under the salary is currently taxed on the gross amount. “This policy was introduced by bringing down the corresponding rates of tax for each income slab. However, gradually the income slabs, as well as rates of tax, were enhanced without restoring the deductible allowances when income from salary was taxed at higher rates.”
Therefore, it is proposed to either rationalise the rates of tax or restore the deductible allowances on account of house rent, utilities, conveyance, etc to minimise the tax burden of salaried individuals.
It is further proposed that the limit of Rs1,000,000 for a loan to employees below the benchmark rate provided under Section 13(7) of the Income Tax Ordinance 2001 should be increased to Rs3,000,000.
Regarding discretionary powers of Commissioner Inland Revenue (CIR), it is recommended to curtail the powers of CIR in creating demand and the condition to pay 10% of the amount of tax under Section 140 (i) of the Ordinance, should be done away with till the appeal is decided at least by the first appellate forum.