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The Income Tax Bar Association Karachi Pre budget seminar 2008 Proposals on Tax policy/reforms SAQIB MASOOD, FCA Partner & Head of Tax KPMG Taseer Hadi & Co Chartered Accountants 24 March 2008 1 Current Status Tax revenue collections – Improvements in tax buoyancy 2005-06 713b 2006-07 846b 2007-08 1,025b Target Tax revenue composition 2006-07 Direct tax – 39% Sales tax – 37% Excise – 8% Customs – 16% 2 Current Status Tax return filers 2006-07- 1.47 million 2007-08- 1.8 million Low Tax / GDP ratio Pakistan – 9% Low income countries -18% Middle income countries - 25% High income countries – 40% 3 Analysis Lower per capita income Pakistan –$ 909 India - $ 965 Sri Lanka - $ 1558 Thailand - $3400 Tax evasion / under reporting Lack of education for taxpayers 4 Analysis Non-discrimination between taxpayers and nontaxpayers Manual information system Inappropriate remuneration level for tax collectors Role of tax experts / advisors Multiplicity of taxes 5 Tax Reforms The current tax administration reform process started around 2001 which has resulted in significant improvements, that include: 6 Tax Reforms Simplification of law – Introduction of the Income Tax Ordinance, 2001 Universal Self Assessment Scheme Improved automation Customs administration reforms [CARE] Pakistan Customs Computerized System [PACCS] Sales Tax Automated Refund Repository [STARR] E-filing, improved web-site 7 Tax Reforms Improved facilitation LTUs / MTUs / RTOs Capacity building measures Work environment & Infrastructure Remuneration Training YET A LOT TO BE DONE 8 Proposals Harmonious approach to improve economic / business environment - tax policy not to be considered in isolation Tax policy an engine for economic growth and equitable in implementation Manageable administrative burden on businesses – reporting requirements Reduced budgetary pressures on tax collectors 9 Proposals Expansion in tax-base Capital gains exemption to be rationalized Long terms gains and new public offerings continue to be exempt Short term trading gains may be taxed at 10 percent Real estate taxation Curtail implied whitening schemes e.g immunity to inward foreign exchange remittances ALTERNATIVELY limit exemption to revenue generating investments 10 Proposals Integration of data base Incentives for taxpayers vs non-taxpayers Change in mindset- facilitator vs collector Improved transparency and fairness Reduction in number of taxes 11 Proposals Capacity building – specially for indirect taxes Separation of appellate forums from administration 12 Thank you 13