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Single tax to replace eight taxes

  1. Decline in national savings
  2. Avoidance of double taxation
  3. Anti-Dumping bill approved
  4. Single tax to replace 8 taxes
  5. MCB's new products
  6. Askari General Insurance

Seven-member task force, headed by former judge of Supreme Court is working to formulate recommendations by Dec 31, 1999

By AMANULLAH BASHAR
August 02 - 08, 1999

Dealing with a series of 48 tax collecting agencies (25 Federal, 15 Provincial and 8 Local) to their satisfaction, is a hectic exercise which requires a great deal of time and patience.

Our trade and industry, has always been crying against the large number of tax collecting agencies because they feel that instead of strengthening the revenue collection, corruption has grown with the increase in number of tax collecting agencies. They have learnt the art to live with them.

Though in principle, the successive governments in the past had agreed to consolidate existing tax collecting agencies into five agencies three at federal and two at provincial levels, however, practically speaking it always remains on the papers only. Earlier, the government had constituted a high-powered committee comprising the members from ministry of commerce, ministry of finance and Central Board of Revenue (CBR) with the task to consolidate the 25 federal taxes into three taxes and 15 provincial taxes in one compact form and the eight local taxes too in a single tax after looking into all pros and cons of the deletion process.

The present government which seems to be serious in its intention for reducing the large number of tax collecting agencies has given the deadline of Dec 31, 1999 to prepare its recommendations for consolidation of 8 industry-related taxes into a single tax which will be collected through one window operation.

Working in line with the directions given by the Finance Minister Ishaq Dar in his budget speech on June 12, 1999, a 7-member task force, headed by former Supreme Court judge Mr. Mohammad Afzal Lone, has started working with a mandate to formulate its recommendations by December 31, 1999.

TAXES TO BE MERGED

The task force is examining as many as eight laws which required such levies to be paid. These taxes are including "Employees Old Age Benefit Act 1976", Workers Welfare Fund Ordinance 1972, Companies Profit (Workers Participation) Act 1972, Workman Compensation Act 1923, Employees Group Insurance Ordinance 1968, Education of Workers Children Cess Ordinance 1974 and the Excise Duty Minerals Act 1974 are the federal laws. While the Employees Social Security Institution Ordinance 1965 is the provincial law,

the labour laws which bind industrialists to pay certain taxes as their contribution to different funds for employees may be repealed and replaced by one comprehensive legislation aimed at introducing a "One Window" operation for collection of these levies.

The government will subsequently move the National Assembly for a new act that will give birth to one labour agency to collect from industrialists and other employers an amount for the welfare of workers.

The task force, in its first meeting, held after the budget, has decided to issue a questionnaire to solicit the opinion of all the major trade unions, particularly the Pakistan Workers Confederation which comprises eight leading labour federations of the country.

The Finance Division at the Federal level has spelled out a 7-point term of reference for the task force which includes the examination of the existing labour laws and levies, identifying difficulties of employers in paying their contribution to a number of labour agencies and evolving broad outline of a "complete" labour law to replace the existing ones.

Another area of consideration for the task forces would be to suggest as to how many of the employees will be required for a single collection agency and where the surplus staff employed by different agencies could be accommodated. Although the single agency concept may render a number of employees surplus but will give a great amount of relief to manufacturing sector from uncalled for hurdles in dealing with all these agencies separately and help arresting the rampant corruption,, the industrialists feel.

There could be no second opinion that the existing system of collecting a number of levies under a number of Federal and Provincial laws is highly cumbersome for the tax payers. A single comprehensive law for collecting one tax from employers may also help to increase the revenue.

Currently, billions of rupees lying unutilized in different funds negate the very purpose of collection i.e. the welfare of workers and their children.

Currently, an amount of Rs 60 billion is lying unutilized in different funds, which includes Rs36 billion in the Employees Old Age Benefit Fund out of which a monthly pension of Rs435 million is paid to the deserving retired workers. Another amount of around Rs12 billion is available in Workers Welfare Fund, while Rs3 billion are reserved for the education of workers' children.

The trade and industry feels that there are certain valid reasons for failure of the system in developing a tax culture amongst the people. Beside, the corruption, one of the major factors, was the lack of proper utilization of the funds for the welfare of the tax payers.