IMF advice for turnover tax rate hike rejected

ISLAMABAD (April 14 2003) : The Central Board of Revenue (CBR) has rejected the proposal of International Monetary Fund (IMF) to increase the rate of 'turnover tax' from 2 percent to 5 percent in the coming federal budget, sources said here on Sunday.

“The turnover tax would remain intact at the rate of 2 percent for the small businessmen in the next budget,” they added.

The CBR would not increase the rate of sales tax for any category of taxpayers including businessmen particularly small manufacturers and retailers, sources said.

The IMF has proposed higher rate of taxes on small businessmen and said that the 2 percent tax on the turnover was insufficient to encourage small taxpayer to enter the formal system, particularly, manufacturers.

If the gross make-up of a retailer or value-addition by a manufacturer is greater than 15 percent or more, that person would pay more tax under the formal regime.

A higher tax rate would be appropriate for the manufacturers, to encourage registration in the formal sales tax regime, the IMF said.

The IMF recommended that “a refinement of the present programme would be to impose a significantly higher rate, say 5 percent, to the turnover of enrolled small taxpayers, and provide that their liabilities could be reduced by up to 60 percent if invoices for their purchases were maintainer”, the Fund added.

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