KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMAP) has estimated that a record sum of Rs180 billion per annum of tax evasion or under-filing of tax returns are recorded in the national economy.
In its pre-budget suggestions, sent to the Central Board of Revenue (CBR), the ICMAP has suggested that for recovery of this huge amount an Integrated Tax Management System (ITMS) should be devised to ensure ‘prompt availability of sales tax, income tax and federal excise data to the taxpayers’.
According to the institute, due to non-availability of ITMS, some unscrupulous exporters have been resorting to the filing of fake invoices to claim huge amounts in refund. By installing ITMS, the alleged malpractices could be forestalled. The installing of ITMS will also help in broadening the tax base.
The pre-budget suggestions, sent by the president of institute Sher Afgan Malik, said the forthcoming federal budget must be a relief-oriented with a focused approach on continuing with the existing economic and fiscal policies.
Following is the summary of the pre-budget proposals of the Institute:
– Minimum wage should be fixed at Rs8,000.
– Minimum pension should be Rs5,000.
– In case of individuals, tax slab may be raised to an income up to Rs250,000 and at the rate of 10 per cent for an income from Rs25,000 to Rs500,000.
– Along with the tax return, every individual assesses should file a statement of his / her assets and liabilities as on 30th June, of the tax year. No tax deductions shall be allowed for savings of up to Rs250,000 per family.
– Income of partnership firms shall be taxed, only in the hands of partners. It is not at all justified to tax the income of firm, rather whole of the income of firm should be allowed to be allocated amongst partners and then taxed, in their respective hands.
– It is now the time that government must take initiative to get cost audit compulsory like the financial accounting. The cost audit will help CBR to determine the true profits of business organisations.
– Government must make fresh Pakistan Investment Bonds (PIB) issues to lower dependence on SBP borrowings and to provide a market-driven benchmark, which is needed for the development of the corporate bond market.
– Chemical industry should be given incentives as it showed deceleration, posting only 4.4 per cent year-on-year growth in output during July-January 2006, primarily due to the capacity constraints.
– The fertilizer industry is also facing capacity constraints and it needs incentives. The government should keep consistent policy for paper and board industry.
– Maximum marginal income tax rate should be fixed at 20 per cent both for individual and corporate.
– Dividend income should be taxed, in the hands of recipient. Dividend withholding tax should be done away with and imputed credits should be allowed.
– In case of any company does not pay any tax in spite of income due to various deductions, incentives or exemptions, no imputed credits should be allowed.
– Imputed credits should be allowed only against the actual tax paid by such companies.
– Depreciation, to be provided in the books of account under the companies ordinance, should be the same as provided in the income tax ordinance, on written down value basis.