Shabaz Sharif
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LAHORE: The Institute for Policy Reforms (IPR) has identified three taxes having the potential to jack up the abysmally the low revenue of provinces.
These include agriculture income and urban immovable property taxes and sales tax on services, revealed an IPR analysis on Thursday.
The analysis was carried out by the former Commerce Minister Humayun Akhtar Khan under the supervision of economist Dr Hafeez Pasha.
Citing the statistics by the Ministry of Finance, it noted federal transfers as percentage of total revenue receipts are 85 percent in Punjab, 79.2 percent in Sindh, 94.2 percent in Khyber Pakhtunkhwa and 93.8 percent in Balochistan.
The analysis further stated Punjab generates only 15 percent of its total revenue from its own resources. This is 20.8 percent in Sindh, 5.8 percent in KPK and 6.2 percent in Balochistan.
Authors of analysis pointed out agriculture income tax is currently collected on presumptive basis as a fix tax per acre. The tax rate was fixed in 1997 and experts feel that its rates should be increased keeping in view the inflation in agricultural prices during the last 17 years.
They are of the view the income tax on acreage exceeding 12.5 to 25 acres should be pushed up to Rs750 per acre from 17-year old Rs150 per acre.
For land above 25 acres, the tax rate must be increased to Rs1,250 per acre from Rs250 per acre, added the analysts.
These measures will raise the tax collection from the agriculture sector from Rs1.2 billion to over nine billion rupees, which will still be very low compared with the income generated through farming, commented experts.
Likewise, all the four provinces collate only seven billion rupees on account of urban immovable property tax. The IPR analysis highlighted the statutory rate of this tax is 20 percent, while the effective rate is only three to four percent.
The gap should be reduced by extending the rating areas to include residential and industrial development at the periphery of the metropolitan cities, advised the authors.
Besides, the gross annual rental value should be reviewed through an updated survey, they added. Later, the government should introduce self-assessment regime for the property tax with a reduction in statutory rate.
According to the IPR report, if collected properly, the provincial tax on services are the most buoyant tax. In 2012-13, Sindh and Punjab tax authorities collected Rs70 billion taxes under this head, equivalent to 48 percent of their total tax collection.
The provinces, suggested the report, should benefit from the legal reverse charge mechanism, which allows sales tax on recipient of services. This tax could be levied on import of services, including communication, construction, financial and information and technology in addition to royalties, licence fees and other business services. These measures would add Rs40 billion in the provincial kitties, said the IPR.
The think-tank called for withdrawal of exemptions on technical, software and engineering consultants, travel agents, automobile dealers and cable operators. It favours four percent withholding tax on technical fees, services, contracts and commission.
The federating units should increase their tax to gross domestic product ratio from the current 0.7 percent to one percent in the next three years, suggested the analysis.
After the 7th National Finance Commission award, Punjab receives 46.9 percent from the federal transfers compared with its population share of 56.2 percent; Sindh 26.4 percent against its population share of 24.6 percent; KPK 16.74 percent while its share in population is 13.8 percent and Balochistan gets 9.9 percent of the federal budget transfers as against its share in population of 5.4 percent.
IPR identifies taxes to boost provincial revenue - thenews.com.pk
These include agriculture income and urban immovable property taxes and sales tax on services, revealed an IPR analysis on Thursday.
The analysis was carried out by the former Commerce Minister Humayun Akhtar Khan under the supervision of economist Dr Hafeez Pasha.
Citing the statistics by the Ministry of Finance, it noted federal transfers as percentage of total revenue receipts are 85 percent in Punjab, 79.2 percent in Sindh, 94.2 percent in Khyber Pakhtunkhwa and 93.8 percent in Balochistan.
The analysis further stated Punjab generates only 15 percent of its total revenue from its own resources. This is 20.8 percent in Sindh, 5.8 percent in KPK and 6.2 percent in Balochistan.
Authors of analysis pointed out agriculture income tax is currently collected on presumptive basis as a fix tax per acre. The tax rate was fixed in 1997 and experts feel that its rates should be increased keeping in view the inflation in agricultural prices during the last 17 years.
They are of the view the income tax on acreage exceeding 12.5 to 25 acres should be pushed up to Rs750 per acre from 17-year old Rs150 per acre.
For land above 25 acres, the tax rate must be increased to Rs1,250 per acre from Rs250 per acre, added the analysts.
These measures will raise the tax collection from the agriculture sector from Rs1.2 billion to over nine billion rupees, which will still be very low compared with the income generated through farming, commented experts.
Likewise, all the four provinces collate only seven billion rupees on account of urban immovable property tax. The IPR analysis highlighted the statutory rate of this tax is 20 percent, while the effective rate is only three to four percent.
The gap should be reduced by extending the rating areas to include residential and industrial development at the periphery of the metropolitan cities, advised the authors.
Besides, the gross annual rental value should be reviewed through an updated survey, they added. Later, the government should introduce self-assessment regime for the property tax with a reduction in statutory rate.
According to the IPR report, if collected properly, the provincial tax on services are the most buoyant tax. In 2012-13, Sindh and Punjab tax authorities collected Rs70 billion taxes under this head, equivalent to 48 percent of their total tax collection.
The provinces, suggested the report, should benefit from the legal reverse charge mechanism, which allows sales tax on recipient of services. This tax could be levied on import of services, including communication, construction, financial and information and technology in addition to royalties, licence fees and other business services. These measures would add Rs40 billion in the provincial kitties, said the IPR.
The think-tank called for withdrawal of exemptions on technical, software and engineering consultants, travel agents, automobile dealers and cable operators. It favours four percent withholding tax on technical fees, services, contracts and commission.
The federating units should increase their tax to gross domestic product ratio from the current 0.7 percent to one percent in the next three years, suggested the analysis.
After the 7th National Finance Commission award, Punjab receives 46.9 percent from the federal transfers compared with its population share of 56.2 percent; Sindh 26.4 percent against its population share of 24.6 percent; KPK 16.74 percent while its share in population is 13.8 percent and Balochistan gets 9.9 percent of the federal budget transfers as against its share in population of 5.4 percent.
IPR identifies taxes to boost provincial revenue - thenews.com.pk
