Page 45 - The Pakistan Accountant July-September 2017

Taxation 8. Ordinance referring provision of repealed Ordinance any expenditure incurred by the person in the year ‘wholly and 8.1 The Income Tax Ordinance 1979 has been repealed under exclusively for the purpose of business.’ There is no rationale for Section 238 of the Ordinance and some specific provisions of the adding ‘wholly and exclusively for the purpose of business’ as it repealed Ordinance have been saved under Section 239 of the is practically impossible to prove it and is debatable and open Ordinance for some specific purpose. But it does not mean that doors for corruption. the Ordinance will mention provisions of repealed Ordinance in definitions of terms, etc. used in the Ordinance. For example, 14. Under Section 21 (m) of the Ordinance, any salary paid or under Section 2(29A) income year means income year as defined payable exceeding Rs. 15,000 per month other than by a cross in the repealed Ordinance. So, Ordinance needs to be re-visited cheque or direct transfer of funds to the employee’s bank to delete such references of repealed Ordinance and wherever account will not be allowed to be deducted in computing the possible to include active provisions of repealed Ordinance in income of a person under the head ‘income from business.’ Ordinance to make the Income Tax Laws simple and straight. The question is what that is the basis of taking the figure of Rs. 15,000. To make it rationale and justifiable, it is suggested to 9. Income tax authorities not properly mentioned in laws take this figure equal to 1/12th of tax exempt limit of salary say 9.1 Income tax authorities as mentioned under Section 207 Rs. 33,333 or Rs. 35,000 instead of Rs. 15,000, only then it will of the Ordinance have not been properly replaced in Sections support the system. Further, an unnecessary tension is created of the Ordinance and in Rules of the Rules, and as a result by including illiterate labour force who are in hundreds and taxpayers are being misguided. For example, still mentioning thousands in manufacturing businesses, so to make the tax laws Regional Commissioner under Section 130(4)(a) and Central simple and straight, it is requested to exclude manufacturing Board of Revenue under Section 74(11) and Section 111(5) of the labours and clerical staff from this Section or alternatively Ordinance and many more such mistakes in Ordinance and Rules. enhance the exemption limit from Rs. 15,000 to figure equals to So, the Board needs to re-visit the entire Ordinance and Rules to 1/12th of tax exemption. correct such confusing and misguiding mistakes. 15. Any income of a newspaper employee representing local 9.2 Mentioned about ‘such other executive or ministerial officers travelling allowance is totally exempted from income tax or staff’ under Section 208(1) of the Ordinance, but no where in under Clause 40 of Part I of Second Schedule attached to the Ordinance or Rules their functions and authority have been the Ordinance. To make it rationale, I suggest local travelling explained. allowances of all types of media employees and sales and marketing employees must be exempted totally. 10. Tax structure is not in line with the economic priorities 10.1 One will appreciate that the basic structure of our Income 16. Clauses 51 to 53 of Part I of Second Schedule attached to the Tax Laws and Sales Tax Laws are not in line with the economic Ordinance have covered all high ups including federal ministers priorities of Pakistan as these have been totally distorted due except prime minister and chief ministers, which is not rationale, to un-strategic exemptions ̶ concessions, tax holidays, zero and I suggest it should be included categorically. rating, additions and deletions ̶ to favour the near and dear. Fortunately or unfortunately, the issues which need to be 17. According to Section 12 (4) of the Ordinance ‘no deduction considered in framing these laws have never been strategically shall be allowed for any expenditure incurred by an employee focused and as a result we could not improve our economy in deriving amounts chargeable to tax under the head salary.’ in a way it should have been and we could not even resolve It means income tax will be charged on gross salary which is in our economic issues in the right direction. So we need to re- violation of the Constitution of the Islamic Republic of Pakistan structure these laws in line with our economic priorities and our and against the fundamental rights of a citizen of Pakistan. needs, especially in areas of education, health, employment, Tax should be charged on gross salary after deduction of at industrialisation, law and order, security, science and technology, least necessary expenses of livelihood such as rent, food, cloth, production, investments and savings, governance, etc. This re- utilities, domestic servants, education, health, insurance, etc. structuring should be just like Zero Budgeting that is from the which may be taken as a percentage of gross salary without scratch instead of add/back provisions in the Ordinance and going into its details and complications, as was done for existing Rules. rent allowance, medical allowance, etc. It is how the government can do justice with white collar people and mitigate abnormal Irrational tax provisions effect of high inflation and corruption. High salary taxpayers 11. The taxpayers are not subjected to investigation under the also deserve these concessions as their right, because earning Ordinance and Rules, but under Section 177(1) relating to audit, high salary is not a crime. Otherwise, they will serve in other the word ‘investigation’ has been used, which is just creating country as non-resident Pakistani and the government will lose confusion and tantamount to harassment and corruption. tax revenue. Likewise, salary exempt limit of Rs. 400,000 should be re-worked and revised based upon the above formulae, say 12. The taxpayers are not subjected to inspection under the an exempt upto Rs. 600,000 instead of Rs. 400,000 in a tax year. It Ordinance and Rules and even the designation of the directorate is how huge number of salaried taxpayers will be eliminated and general of Inspection and Internal Audit has been changed to unnecessary work load of the tax authority will be reduced and directorate general of Internal Audit. Then what is rationale in they may be able to focus on material tax revenue targets, if the including ‘Inspector Inland Revenue’ under Section 207 of the tax authority is not interested in corruption by harassing small Ordinance relating to income tax authorities. taxpayers. 13. According to Section 20 of the Ordinance, in computing the 18. According to Section 13 of the Ordinance and Rule 5 of the income of a person chargeable to tax under the head ‘income Rules, the value of conveyance provided by the employer to the from business’ for a tax year, a deduction shall be allowed on employee shall be included in income of employee equals to 5% July - September 2017 The Pakistan Accountant 43eptember 2017 The Pakistan Accountant 43 July - S