RAC drops proposal to replace one percent turnover tax with ''GAT''

The Revenue Advisory Council (RAC) has dropped a major budgetary proposal to replace one percent turnover tax with the proposed Gross Asset Tax (GAT) keeping in view the 18th Constitutional Amendment under which taxation on immovable property is a provincial subject.
Sources told Business Recorder here on Thursday that the RAC headed by Dr Hafiz Pasha has finalised the budget proposals during a meeting convened here at the FBR Headquarters. It has been decided to continue with the existing arrangement of one percent turnover tax. The RAC has observed that after 18th Amendment the taxation of immovable property is a provincial subject and the FBR is not legally empowered to tax the immovable property after 18th Amendment. Therefore, it would be legally not possible to tax the immovable property under the GAT. Therefore, the RAC had dropped the idea for replacement of the turnover tax with the GAT.
The RAC has strongly proposed that the interest income on government bonds for individuals and non-residents will be subject to a final tax rate of 10 percent. Presently, the tax rate is not under the final tax liability. The RAC has further recommended uniform withholding tax rate of 10 percent on property/rental income. However, certain deductions be allowed on account of repair maintenance, bank interest and collection charges etc.
The RAC has recommended that there should be no change in the existing tax payment scheme for around 7,500 commercial importers. The RAC has proposed that the exporters should not be taxed under the Presumptive Tax Regime (PTR). However, one percent withholding at the time of realisation of export proceeds would be treated as minimum tax. It has been further recommended that the effective rate of tax on total income or actual income should be zero percent.
The RAC has further recommended abolition of the regularly duty ranging from 15 to 50 percent, on the import of around 379 luxury items in the upcoming budget (2011-12). The RAC has further proposed introduction of a lottery scheme to improve sales tax collection and documentation.
The FBR had proposed a scheme "Consumers Lucky Draw" as an incentive to the general public for documentation of the Economy". The scheme was intended to offer expensive prizes on submitting invoices/documented receipts of purchases, shopping and dining at restaurants/hotels, etc. However, the FBR was unable to launch the scheme due to several issues. The RAC has now proposed the idea of a lottery scheme for the taxpayers keeping in view the best international practices.
The RAC has further proposed a centralised system for audit through utilisation of third party information. The audit system at the Board''s level should be centralised for effective utilisation of the data and third party information based on accurate taxpayer profiles.
The FBR has informed the RAC that the Directorate General of Intelligence and Investigation Inland Revenue has issued 55,000 notices to the non-filers of income tax returns and un-documented persons. The directorate has issued 1,100 provisional assessments orders against un-documented individuals and issued income tax demand notices involving huge amount of over Rs 861 million across the country. In 1,100 new cases, assessment orders have been dispatched to the wealthy persons for recovery of evaded amount to the tune of Rs 861 million, sources added.