Senate panel fiercely opposes 1% tax on manufacturing
Asks government to reduce the tax rate to 0.25%.
ISLAMABAD:
The government is likely to face a tough time as a parliamentary panel discussing next year’s budget and the entire business community have opposed 1% tax on all types of manufacturing.
Terming it ‘non-sense’, the Senate Standing Committee on Finance, on the second day of its meeting on Wednesday, recommended reduction in the tax rate to 0.25%. It also expressed concern over putting the responsibility of collecting the tax from traders on manufacturers.
“It does not make sense to burden the industrialists with something they are not responsible for,” said Senator Nasreen Jalil of MQM, who is chairperson of the standing committee.
In the budget for 2012-13, the government has proposed that from July 1 the manufacturers will deduct 1% of total sales made to the traders, aimed at increasing revenues and bringing the undocumented sector into the tax net. The proposal will be the biggest revenue spinner for next year, estimated to generate Rs15 billion.
“When General Pervez Musharraf with all his military powers could not bring the traders into the tax net, how we the manufacturers dare to do that,” said Senator Ilyas Bilour of ANP, who owns a factory.
He said the traders would not be willing to deposit the tax as all the chambers and federations had unanimously opposed the proposal.
The panel members cautioned the government that if parliament approved this tax proposal, there would be hue and cry in the country after July 1.
“The government wants to punish the manufacturers for inefficiency of the Federal Board of Revenue (FBR),” said Senator Usman Saifullah of PPP. He pointed out that the tax would push up prices of all products manufactured in the country as everybody would pass the tax on to end-consumers.
In the budget announced on June 1, the government tried its best to maintain status quo for the rich in a bid to avoid any agitation before elections. However, all its efforts seem to be fizzling out as the proposal to tax manufacturing has angered the business community.
FBR has argued that it has no such big workforce that can go shop to shop to register traders and only manufacturers can help in this connection.
FBR’s Member Inland Revenue Shahid Hussain Asad said all the government’s efforts to broaden the tax base had failed and this was the only option left to bring the traders into the tax net. By becoming withholding agents for the FBR, the manufactures would do community service, he remarked.
The standing committee also recommended increase in customs duty on import of crude palm oil by Rs1,000 per ton, a proposal that would lead to further rise in prices of cooking oil.
Senator Bilour recommended that the duty should be increased to Rs9,000 from Rs8,000 as a lower duty was hurting the domestic ghee manufacturing industries.
The panel is discussing the Finance Bill 2012, showing additional taxes of Rs63 billion from next fiscal year. The committee will finalise its recommendations by June 11, which would be sent to the National Assembly for incorporation in the budget.
Published in The Express Tribune, June 7th, 2012.
The government is likely to face a tough time as a parliamentary panel discussing next year’s budget and the entire business community have opposed 1% tax on all types of manufacturing.
Terming it ‘non-sense’, the Senate Standing Committee on Finance, on the second day of its meeting on Wednesday, recommended reduction in the tax rate to 0.25%. It also expressed concern over putting the responsibility of collecting the tax from traders on manufacturers.
“It does not make sense to burden the industrialists with something they are not responsible for,” said Senator Nasreen Jalil of MQM, who is chairperson of the standing committee.
In the budget for 2012-13, the government has proposed that from July 1 the manufacturers will deduct 1% of total sales made to the traders, aimed at increasing revenues and bringing the undocumented sector into the tax net. The proposal will be the biggest revenue spinner for next year, estimated to generate Rs15 billion.
“When General Pervez Musharraf with all his military powers could not bring the traders into the tax net, how we the manufacturers dare to do that,” said Senator Ilyas Bilour of ANP, who owns a factory.
He said the traders would not be willing to deposit the tax as all the chambers and federations had unanimously opposed the proposal.
The panel members cautioned the government that if parliament approved this tax proposal, there would be hue and cry in the country after July 1.
“The government wants to punish the manufacturers for inefficiency of the Federal Board of Revenue (FBR),” said Senator Usman Saifullah of PPP. He pointed out that the tax would push up prices of all products manufactured in the country as everybody would pass the tax on to end-consumers.
In the budget announced on June 1, the government tried its best to maintain status quo for the rich in a bid to avoid any agitation before elections. However, all its efforts seem to be fizzling out as the proposal to tax manufacturing has angered the business community.
FBR has argued that it has no such big workforce that can go shop to shop to register traders and only manufacturers can help in this connection.
FBR’s Member Inland Revenue Shahid Hussain Asad said all the government’s efforts to broaden the tax base had failed and this was the only option left to bring the traders into the tax net. By becoming withholding agents for the FBR, the manufactures would do community service, he remarked.
The standing committee also recommended increase in customs duty on import of crude palm oil by Rs1,000 per ton, a proposal that would lead to further rise in prices of cooking oil.
Senator Bilour recommended that the duty should be increased to Rs9,000 from Rs8,000 as a lower duty was hurting the domestic ghee manufacturing industries.
The panel is discussing the Finance Bill 2012, showing additional taxes of Rs63 billion from next fiscal year. The committee will finalise its recommendations by June 11, which would be sent to the National Assembly for incorporation in the budget.
Published in The Express Tribune, June 7th, 2012.