WHT agents be allowed 10 percent credit: MCCI opposes income tax exemptions

The Multan Chamber of Commerce and Industry (MCCI) has suggested that there should be no exemption, and all types of income should be brought at par and must be taxed. There are various exemptions in the law which cause discrimination, it said.
MCCI president Shahid Naseem Khokhar said, "We have prepared these proposals with the consent of all members in the larger national interest and suggest that there should be no discrimination in the taxation of incomes of different sectors of the Society.
He said that the existing companies, falling under the definition of 'Small Company' u/s 2(59)A should also be allowed the benefit of corporate tax for 20 percent and absolving them from withholding tax. 'Small Company' should be eligible under Section 2 (59)A for benefits as a company registered on or after the first day of July, 2005. It proposed to allow the benefits available to small companies to already existing companies falling under the definition. It would encourage the corporate sector resulting into the documentation of the economy.
Any amount received as loan, advance or gift (in cash) by an assessee, otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding NTN, is deemed to be the income of the assessee u/s 39(3). This provision is creating harassment among the taxpayers as the tax authorities hit the transaction without going into the nature/merit.
Under Section 39(3), all such cash transactions are deemed to be income, and are charged to the tax. Appropriate provisions should be added to remove the hardship and for non-applicability if source of funds is explained/transaction is verifiable. It opposed the discrimination for the cash transactions if substantiated/ explained.
After amendment through Finance Act 2007, retailers are being assessed under two regimes: under sections 113A & 113B at new reduced rates. After this amendment they will not be entitled to claim any adjustment of withholding tax collected/deducted under any head. Section 113A & B does not allow the deductions of withholding tax against payable tax as it is against the norm of justice.
MCCI has further suggested that system of introducing new return forms every year should be ended and return forms introduced should be at least for three years to avoid the hardship and waste of time. MCCI suggests that it should be allowed either way of filing of returns/statements in non-corporate cases keeping in view the hardship of filling. At present, following are required to file their returns and, in some cases withholding tax statements, through e-filing system: Corporate taxpayers, persons registered for sales tax, associations of persons (AOPs), persons claiming refund even in non-company cases (application for refund also to be filed through email), and persons with salary income of more than Rs 500,000.
It suggests that e-filing be deferred for another two years to avoid the hardship as most non-corporate taxpayers have no access to computers and internet. It suggests that section 122 be reviewed after the amendment of assessment the Commissioner is empowered to again make further assessment and the extent to which the assessment should be specified which may be amended.
Opposing the unlimited powers to Commissioner under section 122 for amendment of any assessment as many times as he intends is against the justice and may lead to malpractice. MCCI has suggested that Commissioners or Commissioners of Appeals having at least 5 years experience should be eligible for appointment as accountant member of ITAT. The Accountant Member of the Tribunal should be a qualified accountant having at least ten years experience in tax practice so that he may understand the accounts and consequently play his role properly and the accountant member should be well-versed with the accountancy vi a vis with taxation laws.
MCCI has suggested that the reference be substituted with appeal to High Court to facilitate the taxpayers . Section 133 of the Income Tax Ordinance 2001 provides reference to High Court where Appellate Tribunal has made an order on an appeal u/s 132 as it is relatively a simple course. An additional forum of appeal will be available to the assessee.
A person in the capacity of withholding tax agent should be allowed tax credit of 10 percent of the tax collected and deposited by them in the government treasury. Every prescribed person under section 153(1), making a payment in full or part including a payment by way of advance for the sale of goods, rendering of services and on the execution of a contract shall at the time of making a payment deduct tax from the gross amount.
The corporate sector at present is under obligation to perform duties as withholding tax agents and is accountable for any default, without any incentive. It said that withholding tax provisions are a major reason the business community at large tends to avoid become a withholding agent. This proposal will encourage the withholding agent to effectively carry out their duties in their capacity as a withholding tax agents.
MCCI said that refund voucher must be issued within time. In case of non-compliance the punitive action should be taken against such officials. There should be no need of submitting any application for refunds, which is mandatory under section 170. Refund, when created, should automatically be paid. The proposal would discourage the undue delay by the officials and malpractice.
Additional Payment for Delayed Refunds. There should be same rate of further tax amount (interest) on tax demands of the department and refunds payable to tax payer, should be equivalent to additional tax amount on tax demand. It will discourage extraordinarily delayed refund by the officials. MCCI has suggested to lower the corporate tax rate equivalent to non-corporate sector and it should 35 percent for banking company 25 percent for private company, public company 20 percent for small company and 25 percent individuals and AOP.
It suggests that taxation of dividend must be exempted in all cases because the income of a company is taxed twice: first in the hands of company and then in the hands of shareholders. Dividend income from corporate sector should be fully exempted. Tax paid profit of the company shall not be again taxed when these profits are distributed among the shareholders as dividend.