KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed an idea to slash income tax on rental income to 10 percent as final settlement of tax liability to avoid mis-declaration by the landlords.
In current scenario, income tax on rental income has been increased up to 30 percent for the rental income exceeding Rs four million per annum in current Finance Act, 2013 due to the reason landowners are reluctant to lease their property just to evade taxes.
The apex body said that previously income tax on rental income was five percent which was increased to 10 percent with full and final discharge of tax liability.
FPCCI has demanded the tax machinery to abolish the income support levy as it is considered an anti- investment levy which encourages black economy and very small amount of revenue collected under this head.
The federation said that it attracts double taxation and serves as counter-productive to the government efforts of documentation in the economy. It discourages investment other than properties, especially restricting investment in mutual funds.
It is introduced in the Finance Act 2013 on individuals having net movable wealth exceeding Rs one million. The net movable wealth is the difference of assets over liabilities.
The apex body has suggested that minimum tax should be reduced to 0.25 percent from existing rate of one percent of the total turnover which should be applicable across the board with no exemption or reduction.
At present minimum tax is levied at one percent of the turnover, and in case of selected manufacturers and distributors either it is not payable at all or at reduced rate up to 80 percent.
The FPCCI said that this regime is effectively negating the provision of Section 57 that allows for losses in tax year to be set-off against future profits and is thus forcing the taxpayer to pay more corporate tax that would otherwise have been due.
The federation has demanded that tax refunds should be paid within 15 days as commissioner passes the order, rather than period of 60 days.
It is suggested that provisions be made in section 170 (2) (c); whereby the commissioner may be authorized to admit an application after the expiry of the stipulated period of two years on genuine reasons.
It said that the procedure of rights for obtaining the refund of tax paid in excess to the amount chargeable to tax is harsh.
The apex body has urged the government to remove disparity in tax/duty between commercial and industrial importer of raw material as it is ultimately consumed by the industry either small medium or large scale.
As it causes corruption, creates distortion in promotion of tax culture and is prone to misuse the prescribed law. It motivates the unscrupulous commercial importers to import the raw material under the guise of manufacturers thus rendering the genuine commercial importers uncompetitive besides, making the national exchequer to suffer from heavy losses.
The federation has suggested that market value of real state should be determined through market surveys which would generate huge direct taxation revenue to the national kitty.
The FPCCI has suggested that in the mean time the declared value of real estate should be doubled.
In existing situation, valuation tables of properties are not based on a market price, which is encouraging the black economy.
It is believed that it is the only option which would revamp the entire system and would relent positive results in generating huge direct taxation revenue as well.
The apex body said that incentive should be given to owners by bringing collector’s value proximate to market value and to reduce the current rate of stamp duties proportionately to market value vis-à -vis collector value.
The federation has demanded the government that exporters should be allowed exemption certificate for import of raw material.
At presently, circular No.08 of 2013 dated 03.09.2013 and clause (72B) of Second Schedule Part-IV provide for issuance of exemption certificate on import of raw material, if the tax paid is equal to higher of last two years of tax.
However, the exporters liable to pay tax U/S 154 are being denied the issue of exemption certificate on the plea that tax paid is not equal to last year. The exporter pays tax U/Sec.154 on realization of exports.
Budget proposals 2014-2015: federation suggests to slash income tax on rental income to 10 percent
