Abolition of presumptive tax regime proposed

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Tax Reforms Coordination Group (TRCG) on Wednesday strongly proposed abolition of Presumptive Tax Regime on import, export and trade along with interest income and rent to introduce adjustable withholding tax on these categories of income for generating additional revenue in 2012-2013.

Sources told Business Recorder on Wednesday that withdrawal of the PTR is part of overall recommendations of the TRCG made in its meeting convened under the Chairmanship of Federal Minister for Finance Dr Abdul Hafeez Shaikh at the FBR House. The recommendations have been submitted to the Ministry of Finance for approval. The TRCG has proposed that the final tax regime should be converted into adjustable withholding tax on five categories of income, ie, import, export and trade, interest income and rent under relevant provisions of the Income Tax Ordinance 2001.

TRCG has also proposed the Ministry of Finance to abolish sales tax zero-rating at domestic stage to remove a major distortion in the value added tax (VAT) regime. A detailed discussion on domestic zero-rating took place at the TRCG meeting that recommended withdrawal of the facility at the domestic stage. TRCG also agreed to the proposal of the Federal Board of Revenue (FBR) to revise FED slabs on cigarettes to increase duty collection, sources said.

Sources said the FBR has informed the IMF about proposed strategy to increase revenue collection and documentation of economy. The FBR would be able to collect Rs 30 billion from registration scheme, Rs 22 billion from investment tax scheme and Rs 30 billion from legal changes in the Alternative Dispute Resolution mechanism. If the scheme is not passed by the National Assembly, the FBR will go for the plan B of documentation and target 3 million potential individuals on the basis of available data. These potential persons would be chased on the basis of available information. An income tax reward scheme would be announced for the tax officials who would detect such cases and complete the investigation till recovery of the due amount of taxes from unregistered persons. A percentage in the range of 3-5 percent of the tax would be paid to the concerned officials engaged in the whole process of detection and recovery as reward.

Sources said the IMF has asked the tax authorities to take steps to increase tax-to-GDP ratio by 1.5 percent during current fiscal year. The FBR must raise 3.5 percent tax-to-GDP ratio in the next three years. The IMF has also asked the FBR to collect 80 percent revenue through policy measures and 20 percent from administrative measures, sources referred to the Fund as urging the FBR.

Meanwhile, an FBR announcement on Wednesday said: A meeting of Tax Reforms Coordination Group (TRCG) was held under the chairmanship of Federal Minister for Finance Dr Abdul Hafeez Shaikh at the FBR House here today to discuss proposals for upcoming Federal Budget 2013. Chairman FBR Ali Arshad Hakeem, in his opening remarks, as host, briefed the minister about various proposals prepared by the FBR for the upcoming budget.

Federal Minister for Finance Dr Hafeez Shaikh, while chairing the meeting, advised members of the group to structure their proposals in line with objectives of practicality, expansion of business and economy, reduction of trade barriers and curbing smuggling. The minister also stressed the need for increasing momentum of revenue collection to achieve the revenue target. He expressed confidence that FBR will achieve assigned budget target.

Following a presentation by FBR''s Sr. Member (IR-Policy) Asrar Raouf, discussions were held on strategy to improve tax policy to increase revenues. The Tax Reforms Coordination Group also deliberated proposals regarding Tax Registration Scheme, Alternate Dispute Resolution Committee (ADRC), Input Tax Scheme, Zero Rating Facility, Sales Tax input adjustment pertaining to unregistered persons and review of Withholding Tax (WHT) and FED rates to facilitate business, reduce cost of doing business, avoid economic burden, harmonize tax laws and promote industry while also improving tax collection.

This was the first meeting of the TRCG for this year and it initiated the TRCG''s mechanism for public and private sector partnership in policy formulation for considering proposals for June 2013 upcoming annual budget. The meeting was attended by Deputy Chairman Planning Commission Dr Nadeem ul Haque and Members TRCG Abdullah Yousuf, Arshad Zuberi, Bashir Ali Mohammad, Shabbar Zaidi, Ali Habib, Arshad Chaudhry and Ali Jameel along with FBR''s other relevant members, the FBR said.

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