Karachi Tax Bar Association (KTBA) has proposed to the Federal Board of Revenue (FBR) to bring the rate of sales tax down to single digit. The KTBA in its budget proposals sent to the chairman FBR Nisar Muhammad Khan termed the current rate of sales tax @ 17 per cent with an additional 3 per cent value addition tax on commercial importers as lofty, saying that there was a narrow tax base due to the high rate which induced tax evasion under invoicing, corruption and smuggling.
Keeping the said issue in view, the KTBA has proposed that sales tax rate should be brought down to a single digit. It said that the rate of sales tax to be brought down to 10 per cent and 3 per cent value addition tax should only be levied on luxury goods which are expected to be sold at a higher value addition the local market as compared to other goods.
Moreover, the KTBA said that higher value addition tax, ie, 5 percent to 7 percent should be levied on import of luxurious items such as cosmetics, chocolates, biscuits, confectionaries, jams, toothpaste, shampoos, juices, drinks, etc.
It further said that the proposed amendments would assist in the expansion of tax base, reduction in smuggling and corruption, rise in government revenues and may increase competitive edge and promotion of documentation of economy.
Furthermore, the reduced tax rate will encourage the unregistered persons to get themselves registered, resulting in broadening of tax base. While, higher value addition tax on luxury goods will not only generate additional revenue but will also support the local industry.