ISLAMABAD: Finance Minister Ishaq Dar categorically declared that the government was committed to ending the culture of non-filing of income tax returns in the country for which tax rates have been enhanced for the non-compliant taxpayers and new scheme has been announced for retailers.
Addressing a post-budget press conference, the Finance Minister said that major budgetary measure is to convince the non-registered persons to voluntarily file their income tax returns. A new scheme for retailers has been drafted in consultation with relevant trade bodies of retailers. Out of 2.5 million retailers across the country, only a few thousands are registered with the tax department. The small retail outlets totalled about 1.5 million in the country and documentation of retailers will considerably expand the tax-base.
Certain retailers are afraid of the Federal Board of Revenue (FBR) or other want to pay tax without direct interaction with the tax department, he remarked. Under the new scheme, the tax department would compulsorily register chain stores, shops in air-conditioned buildings and those accepting credit and debit cards. It has been decided to introduce a two-tier regime for sales tax. The first tier will comprise retailers who are part of national or international chains, or are located in air-conditioned shopping malls, or have credit or debit card machines, or having electricity bill exceeding Rs50,000 per month for the past 12 months. They will be required to pay sales tax under the normal regime and to install Electronic Cash Registers. The remaining retailers will fall in second tier, who will be charged sales tax through their electricity bills at the following rates: 5 percent of monthly electricity bill of up to Rs20,000 and 7.5 percent of monthly electricity bill of above Rs20,000. He encouraged general public to obtain receipts of purchases made from retail outlets. The government would announce a lottery scheme for offering prizes through a computer draw.
Dar dispelled the impression that taxation measures have impact on the general public. He said taxes have not been imposed on items consumed by the masses and cost of non-compliant taxpayers who are purchasing expensive properties and travelling aboard but not ready to come into the tax net has been increased. He said the influential people had obtained SROs for tax exemptions in the past, resulting in massive corruption. The additional tax revenue worth Rs231 billion envisaged in the budget for the next financial year would not impact the common man. He said the government has embarked upon a programme to phase out discriminatory SROs in three years as some influential people had squeezed unnecessary concessions against standard rates of duties, which also bred corruption. He pointed out that elimination of some SROs next year would help raise additional revenue of Rs103 billion. He said the remaining tax would be realised from new taxpayers. About the revenue impact of budget, he said that the withdrawal of exemptions through SROs would have a revenue impact of Rs103 billion whereas the imposition of taxes has a revenue impact of Rs128 billion.
Responding to reports regarding increase in prices of cement due to recent change of taxes on commodity, he said the budgetary proposals contain no measure that could lead to increase in prices of cement. The government would not allow cement manufacturers to create artificial price-hike.
He also warned the profiteers and hoarders that the government would not allow anybody to increase prices of commodities in the name of Finance Bill or budget. The government would take strict action against the profiteers, who would use the name of budget or Finance Bill to raise prices. It is the responsibility of the state to keep check on prices of essential items and commodities after every budget.
About telecommunication services, Ishaq Dar said that sales tax on services is the right of provinces. The government will not charge 19.5 percent federal excise duty on telecom services in provinces which are charging 19.5 percent sales tax on such services. Sindh, Punjab and KP would charge 19.5 percent sales tax on telecom services whereas the FBR will not charge 19.5 percent FED on these services to avoid double taxation. The FBR has reduced FED on telecom services from 19.5 to 18.5 percent for Islamabad and Balochistan province. The government has also announced a reduction in the rate of withholding tax on cellphone charges from 15 percent to 14 percent. Overall two percent taxes have been reduced on telecom sector, i.e, one percent decrease from 15 to 14 percent and 19.5 to 18.5 percent. Litigation in courts regarding telecommunication services would be ended as a result of reduction in taxes on telecom sector, he added.
He said the federal government would ask the provinces to reduce the rate of sales tax on telecom services from 19.5 percent to 18.5 percent in line with the reduced rates of the FED being charged by the federal government. To a question on bonus shares, he said that last year bonus shares worth Rs1,500 billion were issued, but no tax was collected. Around Rs75 billion tax can be generated through bonus shares worth Rs1,500 billion.
During previous year, a huge amount of bonus shares was issued in lieu of dividends; however, no tax on dividends or capital gains was received. To penalise un-documented persons, the government has imposed an advance adjustable income tax, in addition to the tax collectable from return filers, be collected from persons who do not file income tax returns on certain transactions at the rate of 5 percent for dividend income, 5 percent for interest income above Rs500,000, 0.2 percent for cash withdrawals from banks and 0.5 percent in case of advance capital gain tax collected from sellers of immovable property, he added. He said the budget also envisages packages for agriculture, industrial and textile sectors to help realise their true potential.
He said the previous government could increase tax collection by just three percent, while the present government increased it by 16.4% in 11 months of the current financial year. The post of Superintendent has been upgraded to Scale 17 and employees in Scale 1 to 4 will be eligible for one premature increment. Responding to a query, the Finance Minister said that he did not approve a proposal for increasing an amount of magnetisation of transport facility for senior government officials.