Import duty to go up by 5pc, Rs 59 bn relief package
By Ikram Hoti
ISLAMABAD: The budget 2008-09, to be announced on Wednesday, would increase the import duty from 25 to 30 per cent on almost all imported goods while a two per cent increase in the general sales tax (GST) is also proposed, CBR sources revealed to The News on Tuesday.
The GST will go up from 15 to 17 per cent while 95 per cent of imports would be affected by the duty hike. Relevant officials told The News that late on Tuesday night or Wednesday morning, before the announcement of the budget, authorities might decide on an increase in GST rate by one or two per cent.
“But I am sure they would be taking the latter steps,” one of them said. The increased import duty and GST will raise an additional Rs 200 billion in tax revenue the government desperately needs to jack up its development and relief efforts.
When contacted senior officials said the Rs 200 billion increase, from the current tax deposits of Rs 789 billion to roughly Rs 1 trillion in 2008-09, is not the only effort the government is making to ensure more cash inflows.
It also needs to check bank overdrafts next year, and for this purpose the non-tax revenues would also have to be increased, so that the money required for emergency projects is made available without awkward steps mid-year.
The GST rate increase from the present 15 per cent to 17 per cent is being envisaged by merging the one per cent federal excise duty into the sales tax deductible on more than 95 per cent items (barring the essential items like food and medicines).
Additionally, another one per cent is being added to the GST rate, which should stand at 16 per cent over and above which the federal excise duty would be deductible as sales tax. Five per cent duty on import of mobile phones is also being envisaged, as presently there is no duty on the item.
Some of the industrially-consumed items would also be dearer as the rate and collection mode is being changed, both at import and local sales stages.Apart from these steps, the government is also likely to announce a relief for the tax litigants, people who challenge the tax or its assessment by authorities.
The tax-adjudicating authorities are being stripped of certain rights to withhold cases and decisions beyond limits of time. Now tougher time limits are being envisaged in the budget to ensure that these authorities are unable to extort litigants by delaying their cases or by helping to delay postponing payments that are due to the government exchequer.
Top tax authorities have constantly been advising tax managers to tap full revenue potential existing in various sectors to recover the revenue losses occurred due to disturbances in the country last month and gas and electricity shortages which have slowed down the business, trade and industrial activities in the country.
Budget-makers have identified various grey areas from which the full revenue potential is yet to be tapped, while frivolous claims of tax or duty are made against taxpayers. “It is being ensured that while manufacturers, importers, dealers and wholesalers have to pay additional tax and duties, they are also helped against frivolous claims, of course keeping in view that revenue collection from adjudication areas is increased,” said one senior relevant official.
The budget is also programmed to ensure unusual increase in revenue collection on rental income from the properties. There is a need to formulate an action plan for tapping the tax potential by utilising computerised data available with different institutions and departments within the provinces.
To plug revenue leakages and improve tax collection, administrative steps are an important part of the budget, chiefly a mechanism to unearth non-payment by effective monitoring and matching the information being received form different quarters.
Under the new arrangement, lists of withholding agents would be changed to ensure that the middlemen that receive tax amounts for further depositing in banks are unable to steal public money.
A mechanism for recovery of tax and duty arrears is also being envisaged to extract an additional amount of Rs 10 billion next year. The frivolous claims of arrears are being dropped but the genuine ones would be vigorously pursued, as the budgetary resolve goes.
In 2007-08, about 4,000 tax appeals were disposed of by the Supreme Court of Pakistan (3,000 of direct taxes and over 1,000 of indirect taxes). Next year, the speedy settlement of cases that remain after deleting those deemed frivolous would be ensured through new mechanism.
The non-tax budget is being envisaged as follows: total outlay (Rs 1.9 trillion), development portion (Rs 500 billion plus), relief package additional to the existing (Rs 59 billion), salary increase addition (Rs 23 billion), law and order addition over the existing (Rs 34 billion), anti-terror special steps over and above the present that are funded by international institutions and locally (Rs 21 billion), the rest of reckonings pertain to social sector, including health, education and employment, etc.
The News, 11/6/2008