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+--- Thread: Pakistan Business Council supports implementation of value-added tax (/showthread.php?tid=12995)
Pakistan Business Council supports implementation of value-added tax - Lahore_Real_Estate - 05-20-2011 11:27 AM
KARACHI: Pakistan Business Council (PBC) has strongly supported across-the-board implementation of the value-added tax (VAT) in the federal budget for greater documentation and fair competition among the sectors of the economy.
In its budget proposals for 2011/12, the PBC suggested measures to the government for increasing tax-to-GDP ratio and broadening the tax base through fair distribution of the tax burden.
The PBC recently submitted the proposals to the Ministry of Finance, saying that the formal sector in Pakistan faces an unfair competition from the undocumented sectors of the economy.
While supporting the VAT, it said that where documentation is currently not possible as with major segments of the retail and wholesale chain, the model followed for the zero-rated export sectors may be followed.
“For the previously zero-rated export sectors, a lower rate of tax is charged when a registered person sells to an unregistered buyer,” it added.
The PBC recommended that all income irrespective of source should be taxed for broadening the tax base. Presently, certain incomes, most notably agriculture income, are exempted from the income tax, it added.
It said that currently no incentive for individuals insist on proper sales receipts. Therefore, it is recommended that computerised sales tax invoices for sales made to individuals should be made part of the national sales tax compliance incentive.
Giving rationale of the proposal, the PBC said that it would improve documentation of the economy.
The council strongly recommended tax on real estate developers and builders. It proposed real estate developers should be taxed on a per square foot basis for built up property and a per square yard basis on land developed for sales.
“However, houses constructed on plots of less than 100 square yards or equivalent and apartments with a covered area of less than 800 square feet, as well as developed plots of less than 120 square yards in the residential areas should be exempted from tax,” it said.
“This should only be available if the taxpayer does not already have a house, plot or apartment registered in his/her name,” it added.
It was recommended that filing of tax returns should be made mandatory for persons who have credit card in their name; have taken a personal loan from any financial institution; have travelled outside the country in the last financial year; are member of a private club; are members of a professional body; own urban property of more than 240 square yards or equivalent or an apartment with the covered area more than 1,500 square feet. For manufacturing units and retail wholesale trade, it suggested registration with the tax authorities of units, which have either a commercial or an industrial utility connection.
For retail outlets operating with domestic utility connections, the minimum size of 500 square feet is recommended for registration.