Chamber's budget proposals: KCCI for enhancing tax exemption limit to Rs 0.5 million

The Karachi Chamber of Commerce and Industry has suggested a number of measures to enhance purchasing power of middle class of the society in its budget proposals for the year 2011-12, which include enhancing tax exemption limit to Rs 500,000 from Rs 300,000.
President KCCI, Mohammad Saeed Shaifq, in the budget proposals sent to Federal Finance Minister Hafeez Shaikh, said that the tax system works against the middle class and continuing inflation has aggravated the problems of this segment of the society. Phenomenal increase in prices of consumer goods, transportation, energy, housing and education has burdened the middle and lower income groups.
Besides payroll tax, salaried class also pay withholding income tax on utilities, phone bills etc, and since they are not required to file return, most of them do not claim refunds of these withholding taxes. He suggested reduction in maximum tax rate to 15 per cent from 20 per cent helping them to manage standard of living.
--- The house rent exemption of 45 percent basic salary from total income should be same for all salaried person without any maximum threshold calculated on salary of Rs 600,000-The benefit of house rent allowance ie exemption up to 45 per cent of basic salary and utilities exemption up to 20 per cent of basic salary be restored which was withdrawn through the Finance Act 2006 to benefit the salaried class.
It is suggested that following expenses should be allowed either as direct deduction or on tax credit basis subject to submission of complete address of institution or recipient where applicable. 1) Medical expenses without any limit 2) professional membership.
--- The salaried employees should be allowed exemption on expenses incurred on yearly holiday/vacation trips made by the individual with his family either within or outside the country.
--- As most corporate sector salaried employees because of their better economic clout live in a joint family system, therefore, they have to bear the living expenses of their retired parents or non-adult, non-earning children/nephews, nieces etc. This is taxing to some extent on the individual. Here, a certain allowance be allowed for each year and should be income tax free.
He noted that unlike all the developing countries of the world, Pakistan did not offer any substantial protection to its manufacturing/industries sector. Consequently, generally businesses prefer to operate as traders and enjoy associated tax/duty befits. To address the growing inflation, unemployment and shirking business environment the genuine needs of the manufactures should be addressed.
It is proposed that the rate of indirect taxes needs to be reviewed but also indigenously manufactured goods should be made competitive against imported goods. This can be done in consultation with the stakeholders and in view of the policy of the Federal Board of Revenue (FBR).
The chamber is of the view that these measures will improve industrial activities, higher revenues, lower unemployment and possibly increase exports and resultantly in foreign exchanges. KCCI President noted that it is sad to know that owners of 90 per cent of the state resources pay only 5 per cent of taxes. It is essential to known the legal position in this regard.
There is a law enacted 2000-01 to tax agriculture income. The constitution of 1973 debars the federal government to impose any agriculture tax except by the provinces under whose domain the tax falls singularly. All the four provinces have enacted the said laws regarding agriculture tax from the assessment year 2000-01. It is still being collected as a land-based tax by the provinces.
Total collection by all the provinces in 2009-10 was Rs 2 billion only whereas the potential is Rs 200 billion with share of 22 per cent in GDP. Under section 113(1) b of Income Tax Ordinance of 2001 every single citizen of this country who owns an immovable property is bound by law to submit his return even in case of no income. Is this not a mockery of the law of the land, he questioned.