BEST PAKISTANI NATIONAL BUDGET 2021-22 IN CURRENT SCENARIO WHEN COVID-19 WEAKENED AND EATEN GLOBAL ECONOMY

PTI government, Finance Minister Shaukat Tareen and their team deserve Allah’s blessings and congratulation for preparing such a best, honest and strategic budget 2021-22 amid huge challenges in pandemic era within limited resources.

This budget proposes to address shortcomings and anomalies in the tax laws of Pakistan and measures taken to broadening tax base.

I am giving below my few suggestions to Finance Minister and PTI government with a request to please think over it:

1.   There used to be a cry since many decades about low tax to GDP ratio and used to be taken measures to broadening tax base through spreading tax net in the following shapes but government exchequer never witnessed substantial increase in tax revenue due to these measures although tax authority people definitely reach tax defaulters but every time show their helplessness:

1.1       A strong withholding tax regime with audits and reconciliation etc;

1.2       Transitional advance tax provisions of Chapter XII of Income Tax Ordinance 2001, other than those already deleted in previous budget and proposed to be deleted in this budget as well, have been retained to catch tax dodgers through say Vehicle tax, brokerage and commission, electricity (domestic consumers threshold proposed to be reduced from Rs. 75,000/- to Rs. 25,000/-), telephone, immoveable property, distributors, dealers, wholesalers, retailers, educational fee. (Sections 231A to 236Y of I.Tax Ord 2001);

1.3       Income Tax Laws, Sales Tax and Federal Excise Duty Laws are so comprehensive and having check and balance that not a single Pakistani can escape from paying tax.

2.   Frankly speaking there is no low tax to GDP ratio in Pakistan if government sincerely investigates and monitors utilization of Federal and provincial budget routine expenditures which is subjected to massive corruption. Further I don’t know why PTI government and innocent judiciary through suo moto notices reluctant to get audit by big four firms of Chartered Accountants of last ten years of Federal and Provincial trillions of PSDP Funds and Benazir Support Funds.

3.   Since 74 years government never encourages savings and investments habit among people of Pakistan as a result economy of Pakistan still not strengthen in a way it should be. Tax credit for investment in shares, life insurance / Takaful, health insurance and approved pension fund under Section 62, 62A and 63 respectively failed to create savings habit because people could not get attractive tax savings. For example tax credit for investment in shares and life insurance / Takaful under Section 62 of the Income Tax Ordinance 2001 is calculated by dividing tax assessed to taxable income and gets a small percentage. This small percentage apply to lower of (1) payment of premium / contribution or payment for shares (2) 20% of taxable income and (3) Rs. 2,000,000/-. So a small portion of premium / contribution / investment in shares give as tax saving. To create savings habit it is suggested to allow under Section 60 regime “direct deduction from total income the amount lower of above three with a condition to hold life insurance / Takaful Plan or share investment for at least five years”. Then tax savings will attract to create savings and investment habit as tax rates in Pakistan are progressive.   

STAY ALERT, CONTROL VIRUS, SAVE LIVES.

Regards

Syed Imtiaz Abbas Hussain. Chartered Accountant. Karachi. Pakistan. Cell: 0092 3003572479. Email: [email protected]