Pakistan’s tax landscape could see significant changes if proposals by the Pakistan Tax Bar Associates (PTBA) are implemented in the upcoming 2024-25 budget. The PTBA, representing the country’s tax professionals, is advocating for a more comprehensive and streamlined tax system.
Key Proposals:
- Uniform Salaried Taxation: The PTBA seeks consistency in how salaries are taxed, aiming to create a fairer system.
- Pension Tax on High Earners: A 10% tax on pensions exceeding Rs. 100,000 per month is proposed, broadening the tax base.
- Real Estate Capital Gains Tax: Eliminating the holding period for real estate sales would trigger capital gains tax on every transaction, potentially increasing tax revenue.
- Abolishing CVT for Filers: The Capital Value Tax (CVT) on foreign assets could be lifted for tax-compliant individuals.
- Focus on Data Matching and Transparency: The FBR should prioritize data accuracy and make tax returns readily available on the IRIS FBR portal for easy reference.
Simplifying Indirect Taxation:
- Point-of-Sale (POS) Implementation: The PTBA recommends mandatory POS systems at all levels of commerce to improve sales tax collection.
- Single-Digit Tax Rate: A uniform, low tax rate (e.g., 6%) across all levels of sales tax is proposed for simplicity and potential economic stimulus.
- Reduced Online Tax Rate: Lower sales tax rates for online banking and credit/debit card transactions could encourage digital payments.
Addressing Challenges and Digital Solutions:
- Expanding Tax Net: The PTBA highlights the need to bring more individuals, such as wholesalers and service providers, into the tax system.
- Digitalization and Transparency: Enhanced digital integration within businesses and the tax system is seen as crucial for closing the tax gap and improving efficiency.
- Strengthening FBR Governance: Proposals include establishing oversight mechanisms, leveraging AI for data analysis, and ensuring better documentation within the economy.
Facilitating Taxpayers:
- Budget Transparency: The PTBA suggests disclosing how tax revenue is spent on specific projects to increase public trust.
- RTI Access to Public Servant Returns: Making tax returns of government officials and politicians accessible via Right to Information (RTI) could promote accountability.
- Competitive FBR Salaries: Revising FBR salaries to match provincial revenue authorities could attract and retain qualified personnel.
- Publicly Available FBR Performance Reports: Regularly publishing FBR performance reports would enhance transparency and public understanding.
The Road Ahead:
The PTBA’s proposals offer a roadmap for a more inclusive, efficient, and transparent tax system in Pakistan. Whether these suggestions are incorporated into the final budget remains to be seen. However, they highlight important areas for reform and modernization of Pakistan’s tax administration.
