‘Budgetary proposals to fuel inflation’

KARACHI: Consultants have found a number of deficiencies in the taxation measures proposed in the budget 2019-20 saying these are also contrary to the PTI’s election manifesto.

Speaking at a post-budget seminar, organised by Karachi Tax Bar Association (KTBA) on Thursday, these experts pointed out that the proposed budgetary steps would trigger inflationary trend.

They deplored the absence of measures to boost exports, which would help reduce the current account gap. Also the budget lacked steps to protect domestic industry or even generate the much-needed employment for teeming youth.

There was a need to bring in revolutionary measures which could have curtailed imports of luxury items as there was no mention of banning imports of such goods like luxury cars, chocolate, eatables, shaving razors etc.

By imposing higher taxes on sugar, milk, soft drinks, garments, cooking oil, cement etc would result in a cost push inflation and such a move should have been avoided particularly when most of these goods are used by common man.

The budget 2019-20 document, they said, is totally missing with measures which could have helped to address the ‘trust deficit’ between collectors and taxpayers. “How will the government achieve the Rs5,550bn tax revenue target without introducing reforms in the tax collection machinery?” they questioned.

They were apprehensive that administrative measures totally lacking which could help to meet the tax revenue target because delegation of power continued to be a source of litigation between different government departments.

All sales tax special procedures have been withdrawn and an SRO would be issued on July 1. Thus, majority goods presently specified under Chapter XIII of the Sales Tax Special Procedures Rules 2007 have been proposed to be transposed to the Third Schedule of the Sales Act 1990.

The budget proposes that goods like auto parts and accessories, biscuits, confectionery, chocolates, toffees and candies, tiles, arms previously exposed to extra tax will now be subjected to sales tax at standard rate.

The tax consultants believe that registration through National Database Registration Authority was not a solution to bring people in the tax net. They suggested incentives like waiver from audit, quarterly returns, Sections 38 and 40B should be offered to retailers to win their confidence.

The speakers include KTBA President Mohammad Rehan Siddiqui, Partner EY Ford Rhodes Salman Haq, Partner Shekha & Mufti Adnan Mufti and Mohammad Zubair Motiwala.