SATURDAY APRIL 16: Agricultural income likely to come under tax net: Federal Budget on May 28

ISLAMABAD: The Federal budget for 2011-2012 will be presented to parliament on May 28, according to a letter received by the Federal Board of Revenue (FBR) from the Ministry of Finance. The budget is expected to introduce new tax measures along with reforms in the General Sales Tax (GST) and increase in the ambit of income tax to include income from real estate, agriculture and assets.
Sources told Business Recorder here on Friday that budget documents along with Finance Bill (2011-2012) and the Annual Budget Statement shall be transmitted to the Senate Secretariat prior to May 28. The revenue collection target of the FBR for 2011-12 would depend upon the ability of the government to get the new taxation proposals of Rs 80-90 billion, withdrawal of sales and income tax exemptions approved by the parliament. The FBR is expected to amend the Second Schedule of the Income Tax Ordinance 2001 and thereby withdraw a number of income tax exemptions. Comprehensive changes are expected in withholding tax regime to improve compliance of the withholding agents.
Sources revealed that bringing the informal sector into the tax net through a host of measures was also shared with the International Monetary Fund (IMF). Bringing the informal sector into the tax net would help in making the tax system more equitable. The rate of the sales tax may be brought down from 17 to a lower level. In the budget for 2010-11 the government increased sales tax rate by one percent (from 16 to 17 percent) to generate an additional Rs 30 billion. Major changes are expected in the Sales Tax Act 1990 in the forthcoming budget including withdrawal of special rules and procedures for several sectors, including retailers.
The FBR is reportedly proposing rationalising the Federal Excise Duty (FED) on few excisable commodities with upward revision in the rate of the FED on cigarettes. It is expected that the Finance Act 2011 would also amend the Income Tax Ordinance 2001 and introduce some new enforcement measures for increased documentation of the economy. The government may propose a major change in the Universal Self Assessment Scheme (USAS) of the Income Tax Ordinance 2001 by restricting the USAS to only regular filers of income tax returns and statements while non-filers would be excluded from this scheme. Other changes would also be introduced in the tax laws to ensure enforcement and compliance by those registered.
Finance Minister has also requested the provinces to take measures to effectively tax the income of the agriculture and real estate sector starting form next fiscal year and plug all the leakages. Sources said that the FBR will present the taxation proposals before the special budget meeting of the cabinet on May 28. According to the tentative timeframe for announcement of budget, the FBR will place the budget documents and taxation proposals before the Cabinet for approval at 11:00 and budget would be announced in the National Assembly at 17:30 hours. National Assembly is expected to start discussion on the federal budget from May 31 and winding up speech of the Finance Minister is likely to be on June 10 subject to the approval of the budget.
Finance Ministry has suggested that the special meeting of the Cabinet may be arranged at the Prime Minister's Secretariat. The proposed timings would provide a few hours between the conclusion of the meeting and the budget speech for making changes in the budget documents if any, as may be directed by the Cabinet before budget presentation to the National Assembly, sources added.