Regressive tax: Pensioners groaning under income support levy
Affectees term the levy unfair, say they are already paying 10% tax on profits.
Affectees term the levy unfair, say they are already paying 10% tax on profits. DESIGN: ESSA MALIK
ISLAMABAD:
Saleem Asghar Mian, a 70-year-old retired civil servant, is unhappy. His pension invested in fixed deposits has been taxed despite paying 10% withholding tax on profits.
Mian, who complains that the government is “illegally double-taxing” the “captive taxpayers”, is one of hundreds of thousands of pensioners who have been affected by the income support levy that the PML-N government imposed in the budget on both tangible and intangible moveable assets. The government even did not exempt the Pensioner Benefit Fund and Bahbood Fund, which were earlier exempted from income tax.
“Pensioners are being taxed, this is highly unfair and illegal,” said Mian, who had served in the Federal Board of Revenue (FBR) on senior positions.
He said depositors paid 10% withholding tax on profit earned on fixed deposits and the new income support levy on the already taxed amount was tantamount to double taxation.
Pensioners feel the government is offering tax relief to affluent industrialists and at the same time heaping pressure on people who are already overburdened. It seems that tax authorities are reluctant to broaden the extremely narrow tax base, they say.
The country has long been struggling to broaden the shrinking tax base and document a huge black economy. In a population of over 180 million, only 711,000 filed income tax returns last year, according to the FBR.
The government took some steps in the budget to bring more people into the tax net. However, it could not withstand the pressure from voters, traders and industrialists and later withdrew the sales tax imposed on the entire supply chain, which had been aimed at documenting the economy.
Malik Tariq is another pensioner who recently retired from government service after serving for about 40 years. In a newspaper, he wrote that the income support levy made a mockery of the tax exemption enjoyed by pensioners and would only add to their woes as they could hardly meet their expenses amid high inflation, further fuelled by a rapid rupee depreciation.
In June, the government introduced the Income Support Levy Act 2013 in what it called an attempt to take paltry amounts from the wealthy and distribute among the downtrodden in the country. The levy will be charged at a rate of 0.5% of net movable assets from tax year 2013. If a person fails to deposit the levy or understates the value of assets, he will be liable to pay 16% penalty, according to the law.
The FBR hopes to collect Rs15 billion on this account in the current fiscal year 2013-14 and has framed rules in this regard. Taxpayers will file a wealth statement along with annual income tax return by the end of October. The levy will be collected on the movable assets declared in the wealth statement.
A senior FBR official told The Express Tribune that irrespective of whether an asset is owned by a pensioner the levy will be applicable to all types of moveable assets declared in the wealth statement.
“The rules framed to collect the income support levy are ambiguous, uncertain and having no calculation methodology,” said Dr Ikramul Haq, a tax expert.
He argued that assets accumulated by virtue of inheritance, gifts and provident funds should not be subject to the levy.
Haq said the taxpayers often declared their assets in the wealth statement to avoid concealing them but the declaration did not provide the FBR with the right to charge the levy as some of them might be maturing at given due dates.
He pointed out that there were many problems with the levy and the Sindh High Court had granted a stay order, barring the FBR from collecting the tax until November 21 when the court would give its final verdict.
Published in The Express Tribune, October 20th, 2013.
Saleem Asghar Mian, a 70-year-old retired civil servant, is unhappy. His pension invested in fixed deposits has been taxed despite paying 10% withholding tax on profits.
Mian, who complains that the government is “illegally double-taxing” the “captive taxpayers”, is one of hundreds of thousands of pensioners who have been affected by the income support levy that the PML-N government imposed in the budget on both tangible and intangible moveable assets. The government even did not exempt the Pensioner Benefit Fund and Bahbood Fund, which were earlier exempted from income tax.
“Pensioners are being taxed, this is highly unfair and illegal,” said Mian, who had served in the Federal Board of Revenue (FBR) on senior positions.
He said depositors paid 10% withholding tax on profit earned on fixed deposits and the new income support levy on the already taxed amount was tantamount to double taxation.
Pensioners feel the government is offering tax relief to affluent industrialists and at the same time heaping pressure on people who are already overburdened. It seems that tax authorities are reluctant to broaden the extremely narrow tax base, they say.
The country has long been struggling to broaden the shrinking tax base and document a huge black economy. In a population of over 180 million, only 711,000 filed income tax returns last year, according to the FBR.
The government took some steps in the budget to bring more people into the tax net. However, it could not withstand the pressure from voters, traders and industrialists and later withdrew the sales tax imposed on the entire supply chain, which had been aimed at documenting the economy.
Malik Tariq is another pensioner who recently retired from government service after serving for about 40 years. In a newspaper, he wrote that the income support levy made a mockery of the tax exemption enjoyed by pensioners and would only add to their woes as they could hardly meet their expenses amid high inflation, further fuelled by a rapid rupee depreciation.
In June, the government introduced the Income Support Levy Act 2013 in what it called an attempt to take paltry amounts from the wealthy and distribute among the downtrodden in the country. The levy will be charged at a rate of 0.5% of net movable assets from tax year 2013. If a person fails to deposit the levy or understates the value of assets, he will be liable to pay 16% penalty, according to the law.
The FBR hopes to collect Rs15 billion on this account in the current fiscal year 2013-14 and has framed rules in this regard. Taxpayers will file a wealth statement along with annual income tax return by the end of October. The levy will be collected on the movable assets declared in the wealth statement.
A senior FBR official told The Express Tribune that irrespective of whether an asset is owned by a pensioner the levy will be applicable to all types of moveable assets declared in the wealth statement.
“The rules framed to collect the income support levy are ambiguous, uncertain and having no calculation methodology,” said Dr Ikramul Haq, a tax expert.
He argued that assets accumulated by virtue of inheritance, gifts and provident funds should not be subject to the levy.
Haq said the taxpayers often declared their assets in the wealth statement to avoid concealing them but the declaration did not provide the FBR with the right to charge the levy as some of them might be maturing at given due dates.
He pointed out that there were many problems with the levy and the Sindh High Court had granted a stay order, barring the FBR from collecting the tax until November 21 when the court would give its final verdict.
Published in The Express Tribune, October 20th, 2013.