Back to normal: Govt gives in to pressure, reduces taxes on transporters
Cuts rates for both passenger and goods transport vehicles.
The federal government halved the income tax rate for passenger transport vehicles, reducing it from Rs500 per seat annually to Rs250. PHOTO: FILE
ISLAMABAD:
Caving in to the pressure from transporters, the federal government on Monday significantly lessened their tax burden, in yet another retreat in its so far, what appeared to be, half-hearted attempts to broaden the narrow tax base.
Through a Statutory Regulatory Order (SRO) – an unpopular way of giving tax breaks to different lobbies – the Federal Board of Revenue (FBR) reduced income tax rates, levied in the budget this year, for both passenger and goods transport vehicles.
SRO 980 was issued following negotiations between Finance Minister Ishaq Dar and an alliance of transporters, which were held over the weekend in Karachi. Only after Dar agreed to give them concessions, the transporters called off their 11-day long strike.
The strike had adversely affected export consignments ahead of Christmas and New Year celebrations in the United States and Europe, the country’s two largest trading partners.
According to the notification, the federal government halved the income tax rate for passenger transport vehicles from Rs500 per seat per annum to Rs250. Similarly, a new clause has been inserted in the Income Tax Ordinance of 2001 to give tax relief to the goods transporters through the same SRO.
Against the existing income tax rate of Rs 3 per kg of laden weight, the new income tax rate for the goods transport contractors will be 2.5% on payments for rendering or providing carriage services. The Rs3 rate had earlier been reduced from Rs 5, after pressure exerted by the transport lobby.
The tax rates were set by the PML-N government in June this year when it imposed Rs207 billion worth of new taxes. The about-turn came less than five months after the approval of the budget.
The government has set a uniform tax rate for goods transporters and oil tankers.
The FBR defended the move. By setting a uniform rate of 2.5%, the FBR has actually increased prospects of enhancing revenues, said Shahid Hussain Asad, Member Income Tax Policy of the FBR.
In 2012-13, the share of transport, storage and communications sector in the total size of the economy was 13.7%, according to the Economic Survey of Pakistan. However, its share in taxes was almost zero.
It is not for the first time that the government has retreated. It has either backed down on all major initiatives announced to broaden the tax base or made them ineffective.
The policy of broadening the tax base through sending notices to the evaders is not delivering. The process of sending notices has already been drastically rolled back.
Similarly, the policy of asking everybody to file wealth statements has also been changed. The wealth statement has been amended on the demand of Lahore and Karachi traders. Now those who own up to Rs1 million worth of moveable assets will not be liable to submit the statement.
The third initiative of catching the evaders by getting access to their bank accounts has also become ineffective as the FBR has not framed requisite rules.
The country’s poor tax-to-GDP ratio of below 9% is the biggest challenge for the government, as revenues are not enough to meet soaring expenditures. According to tax experts, due to stiff resistance from the affluent, the government has resorted to regressive tax measures and is using indirect taxes to generate revenues.
Sales tax collection in the first four months of the current fiscal year was precisely half of the total collection.
However, Shahid Asad said the government’s focus was more on plugging loopholes. He said the FBR has called a meeting of the provincial excise and taxation secretaries to ensure that whatever the tax on transporters is, it is fully recovered. He said so far the provincial authorities have been unable to collect these taxes.
Published in The Express Tribune, November 19th, 2013.
Caving in to the pressure from transporters, the federal government on Monday significantly lessened their tax burden, in yet another retreat in its so far, what appeared to be, half-hearted attempts to broaden the narrow tax base.
Through a Statutory Regulatory Order (SRO) – an unpopular way of giving tax breaks to different lobbies – the Federal Board of Revenue (FBR) reduced income tax rates, levied in the budget this year, for both passenger and goods transport vehicles.
SRO 980 was issued following negotiations between Finance Minister Ishaq Dar and an alliance of transporters, which were held over the weekend in Karachi. Only after Dar agreed to give them concessions, the transporters called off their 11-day long strike.
The strike had adversely affected export consignments ahead of Christmas and New Year celebrations in the United States and Europe, the country’s two largest trading partners.
According to the notification, the federal government halved the income tax rate for passenger transport vehicles from Rs500 per seat per annum to Rs250. Similarly, a new clause has been inserted in the Income Tax Ordinance of 2001 to give tax relief to the goods transporters through the same SRO.
Against the existing income tax rate of Rs 3 per kg of laden weight, the new income tax rate for the goods transport contractors will be 2.5% on payments for rendering or providing carriage services. The Rs3 rate had earlier been reduced from Rs 5, after pressure exerted by the transport lobby.
The tax rates were set by the PML-N government in June this year when it imposed Rs207 billion worth of new taxes. The about-turn came less than five months after the approval of the budget.
The government has set a uniform tax rate for goods transporters and oil tankers.
The FBR defended the move. By setting a uniform rate of 2.5%, the FBR has actually increased prospects of enhancing revenues, said Shahid Hussain Asad, Member Income Tax Policy of the FBR.
In 2012-13, the share of transport, storage and communications sector in the total size of the economy was 13.7%, according to the Economic Survey of Pakistan. However, its share in taxes was almost zero.
It is not for the first time that the government has retreated. It has either backed down on all major initiatives announced to broaden the tax base or made them ineffective.
The policy of broadening the tax base through sending notices to the evaders is not delivering. The process of sending notices has already been drastically rolled back.
Similarly, the policy of asking everybody to file wealth statements has also been changed. The wealth statement has been amended on the demand of Lahore and Karachi traders. Now those who own up to Rs1 million worth of moveable assets will not be liable to submit the statement.
The third initiative of catching the evaders by getting access to their bank accounts has also become ineffective as the FBR has not framed requisite rules.
The country’s poor tax-to-GDP ratio of below 9% is the biggest challenge for the government, as revenues are not enough to meet soaring expenditures. According to tax experts, due to stiff resistance from the affluent, the government has resorted to regressive tax measures and is using indirect taxes to generate revenues.
Sales tax collection in the first four months of the current fiscal year was precisely half of the total collection.
However, Shahid Asad said the government’s focus was more on plugging loopholes. He said the FBR has called a meeting of the provincial excise and taxation secretaries to ensure that whatever the tax on transporters is, it is fully recovered. He said so far the provincial authorities have been unable to collect these taxes.
Published in The Express Tribune, November 19th, 2013.