May 20, 2024 (MLN): The Pakistan Business Council (PBC) has proposed to increase the advance income tax on electricity bills for non-filers to 30%, up from the current 12%, for domestic consumers with monthly bills exceeding Rs200,000.
To broaden the tax base and increase contribution of the undocumented sector to tax collection in Pakistan, PBC recommended 'out of the box' solutions in a letter to Finance Minister Muhammad Aurangzeb, a copy of which is available with Mettis Global News.
PBC recommended increasing advance income tax on non-filers to encourage them to get registered under the tax net.
“Tax rates should be increased to such an extent that they are encouraged by force to get themselves registered,” PBC noted.
| Proposals for increasing Advance Income Tax on Non-Filers | ||
|---|---|---|
| Advance Income Tax | Existing | Proposed |
| Electricity bills issued to non-filers (not having STRN)/unregistered industrial connection | 5% | 30% |
| Electricity bills issued to non-filers (not having STRN)/unregistered commercial connection | 12% | 30% |
| Electricity bills issued to non-filers (monthly bill exceeds Rs200,000) domestic connection | 7.5% if bill exceeds 25,000 | 20% |
| Retail and marriage halls sector – Extra Sales tax [in addition to normal sales tax of 18%] | 17% if bill exceeds 50,000 | 25%, if bill exceeds Rs100,000; and 30% for bill exceeding Rs200,000/month |
| Gas bills issued to non-filer Industrial / Commercial connection holders | Zero | 20% |
| Advance Income Tax on Purchase of Arms and Ammunition by Non-Filers | Zero | 100% |
| Advance Income Tax on International business class tickets to be levied instead of FED [in the range of 75,000 to 250,000 based on routes] | FED is applicable | FED be replaced with Advance Income Tax |
| Annual Advance Tax for Vehicles of 2000cc and above (non-filer) [increase is not suggested for below 2000 cc] | 20,000 | 500,000 |
| Advance Tax on Purchase of Luxurious Vehicles by Non-Filers | ||
| 2001cc-2500cc | 6% | 24% |
| 2501cc-3000cc | 8% | 24% |
| 3000cc and more | 10% | 24% |
|
Sales of immovable property above 450 sq yards in Urban Areas by non-filers. [For Filers, Advance tax is applicable @ 3%] |
6% |
10.5% |
|
Advance Tax on Purchase and Sales of lands by Societies developing and selling land only. |
Applicable but not being collected |
Societies developing and selling land parcels be made liable to collect and deposit advance income tax as applicable on purchase and sales of land arcels. |
|
Advance Tax on Foreign payment by Non-Filers through Credit Cards. |
10%. Rate for Filers be reduced to 0% from 5% |
20% |
Note — Advance income tax for filers in all the cases should either remain intact or reduced to increase gap between Filers and Non-Filers.
The country’s largest business policy advocacy platform said that the concept of separate withholding tax rates for filers & non-filers was introduced as a measure for increasing documentation of the economy.
Though large amounts are being collected from non-filers, no effort has been made to increase the tax base, it said.
“Filers are paying taxes up to 35% of their income in addition to Super Tax of up to 10% and when leftover income is used for personal expenses or for purchase of any asset, they also pay advance tax,” PBC added.
On the other hand, non-filers do not pay any tax on their income and the withholding tax applicable on transactions executed by them or assets purchased by them is not much when compared with rates applicable to filers, it warned.
The non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers.
Moreover, PBC recommended leveraging the NADRA database, which holds the identification data of all Pakistanis.
PBC stressed that the Federal Board of Revenue (FBR) should coordinate with concerned departments like banks, registrar of properties, car registration authorities, airlines to trace ownership of vehicles, properties and bank account by Non-Filers as well as frequency of air travel by Non-Filers.
In Pakistan, tax base is very narrow and only 1.6% or 4 million from the entire population of over 250m is registered for income tax, the PBC stated in the letter.
As per March 2022, there are over 66m registered bank accounts in Pakistan, however, the same figure does not correlate with number of filers, it highlighted.
Copyright Mettis Link News
Posted on: 2024-05-20T13:29:28+05:00
