77 different taxes besides annoying tax payers, hindering much needed economic growth

By AMANULLAH BASHAR
Sep 13 - 19, 1999

In the face of formidable number of taxes, the business entities do work neither for the share holders/owners nor for economic growth but primarily to subscribe government's lust for more revenue.

Currently, the corporate as well as the unorganized business sectors have to cope with 77 different taxes including 20 federal taxes, 19 provincial taxes, 14 local taxes and 24 other levies, to carry out their business in Pakistan.

Different governments though verbally acceded to the demand of the business community for reducing the number of taxes and tax collecting agencies but the committees and commissions set up for the purpose never produced practical results. The Finance Minister in his budget speech on June 12, 1999 had set up another committee for amalgamation of eight labour related taxes into a single tax. The recommendations of this committee on the issue have yet to be announced.

Actually, the countrywide strike, recently observed by the business community against the levy of General Sales Tax (GST), was a reaction against the mishandling of the situation. The support extended to the strike call of the traders by different political parties gave it a political colour. Practically speaking, the protest against levying GST was not opposition for the cause of opposition. The cost pushing effect of a variety of taxes generally agitating the minds of masses as the prices of essential items have gone beyond their reach. Such a situation is always exploited by political forces in any society.

Primarily, there is always a need for public education whenever a tax is levied at a massive scale. Prior to levy the GST to meet the conditionalities of IMF, the Central Board of Revenue (CBR) should have informed the people that the GST would replace various existing taxes like Central Excise Duty or import duty at customs stage under GATT system of valuation. Unfortunately it was not done properly.

The CBR, when pointed out by the representatives of the business community agreed that few items are still left over for shifting from Central Excise to Sales Tax regime. CBR also agreed that the left over items would be brought in the sales tax regime in the next federal budget. It was also assured by the CBR that units operating under both CED and GST would face only one joint audit by the department to avoid multiplicity of taxes. The directorate general inspection audit will not carry out any sales tax audit and instructions in this regard would be sent under intimation through traders representative bodies.

In order to pacify the agitated business community, the government has introduced Development Tax which would replace the Income Tax and Turnover Tax from Sept.16, 1999. These steps allowed the traders, retailers and shopkeepers with an annual turnover below Rs5 million to pay one per cent income tax and two per cent tax on their turnover. They would have to pay 0.75 per cent of their turnover as Development Tax. They have also been exempted from maintaining record of their sales.

The government while justifying the relaxation given to small traders has said that since small traders do not have a mechanism to maintain complete record of their turnover, the traders are not required to visit the tax collecting offices to show their turnover and deposit Development Tax instead they will deposit the tax in banks on quarterly basis on a one-page prescribed form. The tax authorities would not be empowered to take any action against the traders, retailers and shopkeepers.

The abolition of Income Tax was a long standing demand of the traders which has been accepted by the government. This new scheme would be valid for two years. However, there would be no change in government policy regarding GST which would remain intact.

It is, however, yet to be seen how the relaxation given to the small traders, retailers and shopkeepers would benefit to hard-hit consumers.

Though, the relief given by the government has calmed down the small traders, retailers and shopkeepers to some extent, however, wide-ranging reforms are needed to make our taxation system to make it simple, easy and free from corruption. The present government admits that the number of taxes and tax collecting agencies is too high in Pakistan and they should be consolidated by merging them into five taxes. Three at Federal level and two at the provincial stage.

The business community feels that reduction in number of taxes would not affect the size of revenue collected under the present system. However, it will help reducing the rampant corruption and too much time the trade and industry has to consume in dealing with the people belonged to various tax collecting agencies.

 

FEDERAL TAXES

Name of taxes Rate Tax collecting agency

1) Import Duty Variable Collectorate of Customs

2) Ware Housing Surcharge 1% - 2% Collectorate of Customs

3) Sales Tax on Imports 15% Collectorate of Customs

4) Export Duty Variable Collectorate of Customs

5) Export Development Surcharge 0.5% Export Promotion Bureau

6) Turnover Tax 0.5% Income Tax

7) Income Tax Variable Income Tax

8) Capital Value Tax 5% of the capital value Income Tax

9) Withholding Tax Vanable Income Tax

10) Income Tax Surcharge on or above income Income Tax

Rs. 200,000/-

11) Wealth Tax. Variable Wealth Tax Department

12) Corporate Assets Tax Variable Central Excise & Sales Tax

13) Capacity Tax Variable Central Excise & Sales Tax

14) Excise Duty Variable Central Excise & Sales Tax

15) Sales Tax 15% Central Excise & Sales Tax

16) Workers Welfare Tax Assessed income not Income Tax

less than Rs. 100,000

@2%

17) Workers Profit Participation fund 5% of Net Profit

18) EOBI Contribution 5% of upto Rs. 3,000/- EOBI

wages above

Rs. 3,000/- Rs. 150/-

19) Research Tax 1% of PBT Ministry of Health

20) Cotton Cess Central Cotton Committee

 

PROVINCIAL TAXES

Name of taxes Rate Tax collecting agency

1) Property Tax Variable Excise & Taxation

2) Betterment Tax Variable Excise & Taxation

3) Surcharge on Property Tax Variable Excise & Taxation

4) Additional Surcharge on Property Tax Variable Excise & Taxation

5) Professional Tax Variable Excise & Taxation

6) Motor Vehicles Tax Variable Excise & Taxation

7) Entertainment Tax Excise & Taxation

8) Cotton Fee Excise & Taxation

9) Paddy Development Fees Excise & Taxation

10) Excise Enactment Excise & Taxation

11) Hotel Tax Excise & Taxation

12) Marriage Hall Duty Variable Excise & Taxation

13) Duty on Hospitals Excise & Taxation

14) Licence Fee on Motor Vehicles Dealers Excise & Taxation

15) Licence Fee on Video Dealers Excise & Taxation

16) Social Security Rs.77 upto Rs.3,000/- Sindh Employees Social

or if salary exceeds Security Institution

Rs.3,000/- Rs.210/-

17) Education Cesss 100/- per worker Sindh Employees Social

Security Institution

18) Capital Gain Tax Variable Sindh Registrar

19) Electricity Duty Rs. 360/- on Industrial Elec. Inspection Authority

Rs. 720/- on Commer.if

bill exceeds Rs.5,000/-

 

LOCAL TAXES

Name of taxes Rate Tax collecting agency

1) Octroi Variable District Town Committee

2) Export Tax Variable District Town Committee

3) District Tax Variable District Town Committee

4) Union Council Tax Variable District Town Committee

5) Market Tax Variable District Town Committee

6) Road cess (on sugar cane) Rs 3.50/- M.T Zonal Sugarcane Commission

7) Road Light Tax (only SITE) KMC

8) Fire Tax 1.5% KMC

9) Local Metropolitan Tax KMC

10) Trade Licence Fees Variable KMC

11) Water Tax Variable KWSB

12) Conservancy Tax 5% KWSB

13) Ground Rent Variable KDA

14) Tax on Vacant Plot/Arrears. KDA

 

OTHER LEVIES

Name of taxes Rate

1) Import Registration Fee 1,500/-

2) Export Registration Fee 1,500/-

3) Drug Registration Fee

4) Drug Manufacturing Licence Fee

5) Stamp Duty Variable

6) Zakat & Usher 2 1/2, 10% of

Barani Land

7) Fuel Adjustment Charge

8) Group Insurance

9) Cost of Living Allowance

10) Workers Compensation

11) Fees for Deposit and Registration of Trade Marks

12) Patent Fees Variable

13) Registration fee of Joint Stock Companies

14) Share Transfer Fee

15) Airport Tax

16) Foreign Travelling Tax

17) Travel by Air

18) Toll Tax

19) Trade Profession Calling

20) Abiana on Agriculture Variable

21) Royalties Variable

22) Tax on Duty Free Shop

23) Market Committee Tax

24) Advertisement Tax on TV