Fiscal Budget 2019-20

[Nilgiri]

Sir I have given following suggestions for improving tax collection many a times repeating here again:

• FBR should be made averse to political/fauji/bureaucratic pressures, with annual ACR based upon 360 degrees.
• For production units tax should be on the basis of electricity/raw material consumed as is the case in many developed countries, SBP has some excellent formulas to work back amount of lending a bank can give to a unit based upon processing capacity, number of electricity units consumed during the year. With some modifications same formula could be utilized to calculate approximate taxes.
• All business must have a license to operate that license should be given by SECP only after tax registration, tax return must be a compulsion for every business no matter how small (SME and above)
• Business property/rent (commercial valuation and not business declarations) should be factored in by FBR for authentication of return. If the rent is high and yet business is reporting cash-flows which are not at par with tax return, bingo you have got another evader.
• Like other parts of the world if a business is reporting continuous losses or barely making it break even that should be the first on the list of FBR for forensic audit.
• Over a period of 5 years, cash transactions should be abolished to be replaced by plastic/payment solution, india has done wonders in this area just like rest of the developed world.
• Property laws should be amended inline with US practices, rental, investment and more than 1 residence property should be heavily taxed, any property transfer/sales even from father to son must be taxed on the basis of capital gains.
• Every business must have insurance, in case of any theft/calamity businessmen usually claim billions of losses and normally govts compensate them but I proposed that any such claim should be equated with their tax returns.
• Any sales/purchase of real estate must be reported to FBR by revenue authority against CNIC number, housing societies (real estate) act to be reviewed and all tax evasion loopholes given to be canceled immediately.
• All vehicles sales/purchase 1300 cc and above should be linked with FBR, no matter even if they are purchased via hire purchase/lease, they should be let go after one payment of tax for vehicle purchase rather a permanent record should be created in FBR against CNIC, see out of 2 million filer about 800,000 are salaried. Auto manufacturers are selling over 100,000 units p.a both personal and commercial vehicles all should be brought into the tax net. Filer non-filer is altogether a different matter, if someone is purchasing a premium vehicle/property/commercial vehicle where did the money come from? if undocumented go to amnesty otherwise pay full taxes@45%.
• Source and proof of income should be a must for any vehicle/property sales/purchase. No purchase in the name of house wife, students, minor children should be allowed.

These are the loop holes in out tax system and now think for a moment will someone fix them nah, i don't think so generals, politicians, bureaucrats, business conglomerates are leehes sucking the lifeline of this nation through these loopholes. Find me 10 liars (lawyers) paying taxes.

Interesting. Hope to see a follow up post later down the road on which of these have been made progress on by the current Pak administration.

 

[The Accountant]

Best option is to just ignore them along those baboon-negro hybrid breed called bengalis, no idea about Pakistan, its demographics, geography besides their media and net searches, hate us and yet hang out in our discussion boards, web portals, websites etc doing nothing except giving their "expert opinions" read "ignorant opinions" and expressing bigotry. Just have a look at bangladeshi forum which is supposed to be a defense forum and yet used as a propaganda machine for the "wonders" their country is performing and somehow finding to link it with pakistan, pass on a mean remark, disgusting.

Although Budget 2019-20 is still a proposal pending approval fro parliament/president but if someone wants I can share two very good analysis on key points of Budget. From my perspective following are the most positive points:

• Eliminate zero rating for five export oriented sectors,
• Increase in additional custom duty from 2% to 4% and 7% on slabs of 16% and 20%, respectively
• Higher income tax rates on salaried and non-salaried persons,
• Streamline taxation regime for the Real Estate Sector,
• Impose higher tax rate on rental incomes.
• Allot 40% higher Federal PSDP allocation from PKR 500bn to PKR 701bn,
• Impose higher tax rate on investment in Government Securities for banks to potentially increase lending to private sector,
• Exempt custom duty on import of raw materials for various industries,
• Supply of energy i.e. electricity (Usd7.5/KWh) and gas (USD 6.5/mmbtu) at subsidized rates to be continued for exporters,
• Automate GST refunds to improve liquidity of export oriented sectors,
• Streamline FBR processes related to import and export to reduce time and procedures for assistance of exporters, and
• Reduce customs duty on import of raw materials for export oriented sectors.
• Enlarge tax net and increase the number of tax payers to 4mn by utilizing the NADRA database,
• Enhance FBR real estate valuation to 85% of market values,
• Withdraw of Amnesty for legalizing the difference between DC value and FBR Value at 3%,
• Increase capital gains from income arising out of sale of property at normal tax rates,
• Restrict purchase of property only through banking instrument
• Treat receipt of gift as normal income,
• Reduce limit for not explaining source of investment through foreign remittance from PKR 10mn to PKR 5mn,
• Charge 5% Additional sales tax on unregistered electricity and gas consumers whose bill exceeds PKR 15,000/month,
• Completely documented transactions for real estate sector to be settled through banking instruments to bring them at par with investment in equities in terms of KYC requirements. Previously real estate was the preferred asset class for High Net Worth Individuals due to lax requirements of disclosure and documentation along with lower FBR and DC valuations.

I can explain the benefits point by point, but I don't have time for petty squabbling without deep understanding of the proposal and its implications on the economy.

Oh and I don't reply to idiotic comments.

Point 1, 2, 8 9 are either impractical or counter productive. Rest are good suggestions already under consideration or implementation stage

 

[ps3linux]

Interesting. Hope to see a follow up post later down the road on which of these have been made progress on by the current Pak administration.

• FBR should be made averse to political/fauji/bureaucratic pressures, with annual ACR based upon 360 degrees. (Not possible in our part of the world means Baboondesh, Bharat, Pak, Sri Lanka, Afghand, and mideast)
• For production units tax should be on the basis of electricity/raw material consumed as is the case in many developed countries, SBP has some excellent formulas to work back amount of lending a bank can give to a unit based upon processing capacity, number of electricity units consumed during the year. With some modifications same formula could be utilized to calculate approximate taxes. (Requires people in FBR who know all sides of business i.e; tax consultancy, FBR and business. Shabbar in my opinion is the best choice for now)
• All business must have a license to operate that license should be given by SECP only after tax registration, tax return must be a compulsion for every business no matter how small (SME and above) (Don’t think so in the short term at least but my friends and I continue to raise the same at various levels)
• Business property/rent (commercial valuation and not business declarations) should be factored in by FBR for authentication of return. If the rent is high and yet business is reporting cash-flows which are not at par with tax return, bingo you have got another evader. (already they are moving in this direction)
• Like other parts of the world if a business is reporting continuous losses or barely making it break even that should be the first on the list of FBR for forensic audit. (May be future)
• Over a period of 5 years, cash transactions should be abolished to be replaced by plastic/payment solution, india has done wonders in this area just like rest of the developed world. (People like me and some others have been discussing the same at various forums, it is difficult but I know there will be efforts in this direction, Fawad Ch already mentioned that he want to move toward digital payment solution albeit being an idiot)
• Property laws should be amended inline with US practices, rental, investment and more than 1 residence property should be heavily taxed, any property transfer/sales even from father to son must be taxed on the basis of capital gains. (This budget is a serious move in this direction property sales will now be heavily taxed)
• Every business must have insurance, in case of any theft/calamity businessmen usually claim billions of losses and normally govts compensate them but I proposed that any such claim should be equated with their tax returns. (may be in the future)
• Any sales/purchase of real estate must be reported to FBR by revenue authority against CNIC number, housing societies (real estate) act to be reviewed and all tax evasion loopholes given to be canceled immediately. (They are moving in this direction even this budget is extremely unfriendly for real estate speculators, there is however the loop hole of housing societies act)
• All vehicles sales/purchase 1300 cc and above should be linked with FBR, no matter even if they are purchased via hire purchase/lease, they should be let go after one payment of tax for vehicle purchase rather a permanent record should be created in FBR against CNIC, see out of 2 million filer about 800,000 are salaried. Auto manufacturers are selling over 100,000 units p.a both personal and commercial vehicles all should be brought into the tax net. Filer non-filer is altogether a different matter, if someone is purchasing a premium vehicle/property/commercial vehicle where did the money come from? if undocumented go to amnesty otherwise pay full taxes@45%. (Far-fetched but may be in the future)
• Source and proof of income should be a must for any vehicle/property sales/purchase. No purchase in the name of house wife, students, minor children should be allowed. (moving in this direction, people think of FATF as a villain to put us in the grey list, I beg to differ best thing that has happened to us in the last 20 – 30 years is being grey listed and on a personal level I am thankful to your country for this genuinely. Someday in the future people in Pakistan will acknowledge this was the best friendly offense Bharat did for us)

Point 1, 2, 8 9 are either impractical or counter productive. Rest are good suggestions already under consideration or implementation stage

I hope you know these are excerpts from the actual budget proposal and not my personal. Nonetheless I have few comments on these points:

1. Eliminate zero rating for five export oriented sectors (This will give level playing field to other industries, in other countries export is encouraged however, only that part of income/production/fixed/variable cost exempted which is related to exports. US IR has some of the scariest and up to date formulas to work such things out)
2. Increase in additional custom duty from 2% to 4% and 7% on slabs of 16% and 20%, respectively (this is to discourage imports across the board)
3. Exempt custom duty on import of raw materials for various industries (Same as point 1)
4. Supply of energy i.e. electricity (Usd7.5/KWh) and gas (USD 6.5/mmbtu) at subsidized rates to be continued for exporters, (Same as part 1, however my opinion has always been is that if the govt wants/needs to subsidize it should be targeted subsidy, by all means export oriented industry should be given subsidy but only on that portion which is exports, not across the board or local sales which gives unfair advantage to these industries vs local consumption oriented production units. One such stupid example is subsidy on electricity units up to 300 I can afford to pay the full price and yet me and people like us who could afford to pay are given useless subsidy which is practically wasted. I agree if being a filer I have to be given some advantage that could be one way but again it has to be targeted not across the board)

 

[The Accountant]

• FBR should be made averse to political/fauji/bureaucratic pressures, with annual ACR based upon 360 degrees. (Not possible in our part of the world means Baboondesh, Bharat, Pak, Sri Lanka, Afghand, and mideast)
• For production units tax should be on the basis of electricity/raw material consumed as is the case in many developed countries, SBP has some excellent formulas to work back amount of lending a bank can give to a unit based upon processing capacity, number of electricity units consumed during the year. With some modifications same formula could be utilized to calculate approximate taxes. (Requires people in FBR who know all sides of business i.e; tax consultancy, FBR and business. Shabbar in my opinion is the best choice for now)
• All business must have a license to operate that license should be given by SECP only after tax registration, tax return must be a compulsion for every business no matter how small (SME and above) (Don’t think so in the short term at least but my friends and I continue to raise the same at various levels)
• Business property/rent (commercial valuation and not business declarations) should be factored in by FBR for authentication of return. If the rent is high and yet business is reporting cash-flows which are not at par with tax return, bingo you have got another evader. (already they are moving in this direction)
• Like other parts of the world if a business is reporting continuous losses or barely making it break even that should be the first on the list of FBR for forensic audit. (May be future)
• Over a period of 5 years, cash transactions should be abolished to be replaced by plastic/payment solution, india has done wonders in this area just like rest of the developed world. (People like me and some others have been discussing the same at various forums, it is difficult but I know there will be efforts in this direction, Fawad Ch already mentioned that he want to move toward digital payment solution albeit being an idiot)
• Property laws should be amended inline with US practices, rental, investment and more than 1 residence property should be heavily taxed, any property transfer/sales even from father to son must be taxed on the basis of capital gains. (This budget is a serious move in this direction property sales will now be heavily taxed)
• Every business must have insurance, in case of any theft/calamity businessmen usually claim billions of losses and normally govts compensate them but I proposed that any such claim should be equated with their tax returns. (may be in the future)
• Any sales/purchase of real estate must be reported to FBR by revenue authority against CNIC number, housing societies (real estate) act to be reviewed and all tax evasion loopholes given to be canceled immediately. (They are moving in this direction even this budget is extremely unfriendly for real estate speculators, there is however the loop hole of housing societies act)
• All vehicles sales/purchase 1300 cc and above should be linked with FBR, no matter even if they are purchased via hire purchase/lease, they should be let go after one payment of tax for vehicle purchase rather a permanent record should be created in FBR against CNIC, see out of 2 million filer about 800,000 are salaried. Auto manufacturers are selling over 100,000 units p.a both personal and commercial vehicles all should be brought into the tax net. Filer non-filer is altogether a different matter, if someone is purchasing a premium vehicle/property/commercial vehicle where did the money come from? if undocumented go to amnesty otherwise pay full taxes@45%. (Far-fetched but may be in the future)
• Source and proof of income should be a must for any vehicle/property sales/purchase. No purchase in the name of house wife, students, minor children should be allowed. (moving in this direction, people think of FATF as a villain to put us in the grey list, I beg to differ best thing that has happened to us in the last 20 – 30 years is being grey listed and on a personal level I am thankful to your country for this genuinely. Someday in the future people in Pakistan will acknowledge this was the best friendly offense Bharat did for us)

I hope you know these are excerpts from the actual budget proposal and not my personal. Nonetheless I have few comments on these points:

1. Eliminate zero rating for five export oriented sectors (This will give level playing field to other industries, in other countries export is encouraged however, only that part of income/production/fixed/variable cost exempted which is related to exports. US IR has some of the scariest and up to date formulas to work such things out)
2. Increase in additional custom duty from 2% to 4% and 7% on slabs of 16% and 20%, respectively (this is to discourage imports across the board)
3. Exempt custom duty on import of raw materials for various industries (Same as point 1)
4. Supply of energy i.e. electricity (Usd7.5/KWh) and gas (USD 6.5/mmbtu) at subsidized rates to be continued for exporters, (Same as part 1, however my opinion has always been is that if the govt wants/needs to subsidize it should be targeted subsidy, by all means export oriented industry should be given subsidy but only on that portion which is exports, not across the board or local sales which gives unfair advantage to these industries vs local consumption oriented production units. One such stupid example is subsidy on electricity units up to 300 I can afford to pay the full price and yet me and people like us who could afford to pay are given useless subsidy which is practically wasted. I agree if being a filer I have to be given some advantage that could be one way but again it has to be targeted not across the board)

I don't see any relationship between the 4 points I mentioned as impractical or counter productive and the 4 points you mentioned.

Can you please elaborate what are you trying to say?

 

[ps3linux]

I don't see any relationship between the 4 points I mentioned as impractical or counter productive and the 4 points you mentioned.

Can you please elaborate what are you trying to say?

I might have misinterpreted but would you please quote the points which you mentioned as impractical, my view has always been debate and understanding so if I am wrong I'll admit it and based upon suggestions will try to improve my suggestion. Since you are part of the business enviro (accounts/audit/finance) we can discuss and understand.

 

[The Accountant]

I might have misinterpreted but would you please quote the points which you mentioned as impractical, my view has always been debate and understanding so if I am wrong I'll admit it and based upon suggestions will try to improve my suggestion. Since you are part of the business enviro (accounts/audit/finance) we can discuss and understand.

It is always good to have a discussion with mature persons like you. Can you please give a brief background of yours so its easy to understand your prospective:

1. 360 degree appraisal is not possible as FBR staff is not competent at all. Its a matter of culture and before 360 degree appraisals we need to change the mindset otherwise harassment of peers and lower staff will increase further which is already too high in FBR. However, on overall basis the idea is good in the form transformation of culture of FBR.
2. Tax on the based of consumption of electricity: This is another form of indirect taxation and will simply result in inflation. Just like FTR regime eventually becomes a cost plus whereas an ideal tax system should be based on taking a portion of your earning based on basic formula of higher you earn and higher will be rates.
   
   Another aspect would be more technology driven industries will be taxed more as compared to labor driven which is suicidal considering that we are about to enter in fourth industrial revolution.
3. Insurance: I am against this due to religious restriction. Considering Islam takes insurance as haram therefore we cannot push it upon businessman. Its a person own choice. However, tax is a form of insurance and I agree that if a person is paying tax then government should support him in case of any problem with him for example preferential treatments in government offices and different departments.
4. Property Tax: You cannot tax property on deem income as it will be counter productive. For example in economy inflation is always there so cost of material will keep on increasing and so should be the prices of houses. If you tax gains on the basis of increment only (just like you propose transfer from father to son to be taxed) it will suppress his purchasing power unjustly.
   
   For example consider my own case. I am living in my parents house and given the prices of the house I cannot purchase one on my own. So i decided to purchase two flats on installments and waiting for completion of installments so that I can bought a bigger house of my own from the proceeds of the two flats. However, if you tax me on those two flats then I will never be able to buy a bigger house.
   
   However, on the other hand person buying houses as a business should be taxed therefore, government has rightfully taxed the houses if sold within a certain period of purchase. By this way they will tax those who are using real estate as a business but will not tax the actual buyer who want to live in a house. Remember taxation is on earning not on consumption. I have already paid tax on my income which I am saving for buying my own property for my residence. If you tax me on this, it will not only be double taxation but counter productive as people will not be able to buy houses which is negative for an increasing population.

 

[ps3linux]

It is always good to have a discussion with mature persons like you. Can you please give a brief background of yours so its easy to understand your prospective:

Ok Poor old me, dont want to be presumptuous or that my intro should reek of bigotry from engineering back ground to business studies to acca to financial planning to boston university to financial engineering to behavioral finance to interest in economic (actually lost track of my qualifications years ago) currently working toward a PhD through a master in economics with emphasis on Islamic micro finance. Professional worked in Financial institutions (banks, AMCs) primarily sales management, product development, product management etc etc, but prefer always sales management. A very serious addiction to computer, linux and electronics particularly embedded systems, reading/learning, yoga, physical fitness, writing, etc. Multilingual punjabi, urdu, english, arabic, pashto, italian and C (along its variants). I'll try and reason my suggestions:

1. 360 degree appraisal is not possible as FBR staff is not competent at all. Its a matter of culture and before 360 degree appraisals we need to change the mindset otherwise harassment of peers and lower staff will increase further which is already too high in FBR. However, on overall basis the idea is good in the form transformation of culture of FBR. (I know it is a cultural shock not just for public sector but private sector as well I am firm in my opinion that it is bureaucracy due to which we are in such a mess, they lack vision/commitment/integrity and above all accountability, just open today's business recorder an ex sec finance now lectures the govt how to manage the economy same a**hole who had 3 terms as sec finance and responsible for the mess. 360 may be too much but you too know that we in Pvt sector have clear JDs, J.O, BSCs, KPI whatever, what is the case with FBR nothing first step would be to align them with pvt sector model and may be a decade or so later 360 degrees, which doesn't just work for higher ups but lower staff as well)
2. Tax on the based of consumption of electricity: This is another form of indirect taxation and will simply result in inflation. Just like FTR regime eventually becomes a cost plus whereas an ideal tax system should be based on taking a portion of your earning based on basic formula of higher you earn and higher will be rates. (Ahan not indirect but income tax is assessed on the basis of electricity consumption, it has its own merits and demerits, its not the end. our family injection molding unit pays full tax, while couple of others in our vicinity pay peanuts it should be tool in cases where tax collection is lower despite propensity for higher electricity consumption, like I mentioned SBP has some wonderful formulas to workout cose, profit etc based upon these factors and they could be utilized. This tool should be utilized in tangent to compare tax returns of the business vs electricity consumed, more of an audit oriented tool I would say) Another aspect would be more technology driven industries will be taxed more as compared to labor driven which is suicidal considering that we are about to enter in fourth industrial revolution. (I know what you mean)
3. Insurance: I am against this due to religious restriction. Considering Islam takes insurance as haram therefore we cannot push it upon businessman. Its a person own choice. However, tax is a form of insurance and I agree that if a person is paying tax then government should support him in case of any problem with him for example preferential treatments in government offices and different departments. (Yaar don't get me started on this I have wasted years of my life in doing comparative study of all major religions, more than superficial study of Islam our molvis preach Islam only in letter not the spirit ruet of eid is one typical example along insurance, I'll leave this one it is beyond the scope of this board and not exactly my favorite topic primarily because of our inbred intolerance and extremist tendencies)
4. Property Tax: You cannot tax property on deem income as it will be counter productive. For example in economy inflation is always there so cost of material will keep on increasing and so should be the prices of houses. If you tax gains on the basis of increment only (just like you propose transfer from father to son to be taxed) it will suppress his purchasing power unjustly. (Actually I can give you reference for IRS codes of US real estate taxes I am personally impressed with them, although I will take my sweet time, they are not unjustified what they have done is make sure everyone can mortgage a house, sales of prime residence due to transfer unforeseen reasons in not taxed, it is the investment purpose of property which is highly taxed, mortgage there is for 30 years normally, imagine a parent purchasing a house at the age of 34 average @$100,000 lived to the age of 86 at the time of death passed on the house to the child @market value of $1,000,000. Child has his own house now $900,000 will be taxed @tax bracket of the child, thus discouraging holding more than one property and the gain has been made without giving anything in return to the country. Here billions of worth property is passed on to children who already have made enough billions of their without any benefit to the country this should be the target for tax collection. I am not a fanboy of western systems at-least not in my age and with my exposure, US laws have few things which i appreciate the law, the intent to propose this law by the legislator/regulator, purpose of the law and interpretation of the law its the highlighted one which convinced me about them, besides property laws in pakistan are against demand/supply curve and Islamic laws-spirit not the intent)

For example consider my own case. I am living in my parents house and given the prices of the house I cannot purchase one on my own. So i decided to purchase two flats on installments and waiting for completion of installments so that I can bought a bigger house of my own from the proceeds of the two flats. However, if you tax me on those two flats then I will never be able to buy a bigger house.

However, on the other hand person buying houses as a business should be taxed therefore, government has rightfully taxed the houses if sold within a certain period of purchase. By this way they will tax those who are using real estate as a business but will not tax the actual buyer who want to live in a house. Remember taxation is on earning not on consumption. I have already paid tax on my income which I am saving for buying my own property for my residence. If you tax me on this, it will not only be double taxation but counter productive as people will not be able to buy houses which is negative for an increasing population.

 

[The Accountant]

Ok Poor old me, dont want to be presumptuous or that my intro should reek of bigotry from engineering back ground to business studies to acca to financial planning to boston university to financial engineering to behavioral finance to interest in economic (actually lost track of my qualifications years ago) currently working toward a PhD through a master in economics with emphasis on Islamic micro finance. Professional worked in Financial institutions (banks, AMCs) primarily sales management, product development, product management etc etc, but prefer always sales management. I'll try and reason my suggestions:

1. 360 degree appraisal is not possible as FBR staff is not competent at all. Its a matter of culture and before 360 degree appraisals we need to change the mindset otherwise harassment of peers and lower staff will increase further which is already too high in FBR. However, on overall basis the idea is good in the form transformation of culture of FBR. (I know it is a cultural shock not just for public sector but private sector as well I am firm in my opinion that it is bureaucracy due to which we are in such a mess, they lack vision/commitment/integrity and above all accountability, just open today's business recorder an ex sec finance now lectures the govt how to manage the economy same a**hole who had 3 terms as sec finance and responsible for the mess. 360 may be too much but you too know that we in Pvt sector have clear JDs, J.O, BSCs, KPI whatever, what is the case with FBR nothing first step would be to align them with pvt sector model and may be a decade or so later 360 degrees, which doesn't just work for higher ups but lower staff as well)

Agree. If starts now we might be able to change a culture in a decade or so.

1. Tax on the based of consumption of electricity: This is another form of indirect taxation and will simply result in inflation. Just like FTR regime eventually becomes a cost plus whereas an ideal tax system should be based on taking a portion of your earning based on basic formula of higher you earn and higher will be rates. (Ahan not indirect but income tax is assessed on the basis of electricity consumption, it has its own merits and demerits, its not the end. our family injection molding unit pays full tax, while couple of others in our vicinity pay peanuts it should be tool in cases where tax collection is lower despite propensity for higher electricity consumption, like I mentioned SBP has some wonderful formulas to workout cose, profit etc based upon these factors and they could be utilized. This tool should be utilized in tangent to compare tax returns of the business vs electricity consumed, more of an audit oriented tool I would say) Another aspect would be more technology driven industries will be taxed more as compared to labor driven which is suicidal considering that we are about to enter in fourth industrial revolution. (I know what you mean).

In the example you suggest, electricity bill can be used as a tool of audit or as a tool to sample out the tax evaders. But still besides tax evading there could be many factors such as difference in use of technology, use of solar panels, or own electricity generators.

1. Insurance: I am against this due to religious restriction. Considering Islam takes insurance as haram therefore we cannot push it upon businessman. Its a person own choice. However, tax is a form of insurance and I agree that if a person is paying tax then government should support him in case of any problem with him for example preferential treatments in government offices and different departments. (Yaar don't get me started on this I have wasted years of my life in doing comparative study of all major religions, more than superficial study of Islam our molvis preach Islam only in letter not the spirit ruet of eid is one typical example along insurance, I'll leave this one it is beyond the scope of this board and not exactly my favorite topic primarily because of our inbred intolerance and extremist tendencies).

Lets agree to disagree on this. As I said it should be a persons own personal choice rather than forcing it upon the people.

1. Property Tax: You cannot tax property on deem income as it will be counter productive. For example in economy inflation is always there so cost of material will keep on increasing and so should be the prices of houses. If you tax gains on the basis of increment only (just like you propose transfer from father to son to be taxed) it will suppress his purchasing power unjustly. (Actually I can give you reference for IRS codes of US real estate taxes I am personally impressed with them, although I will take my sweet time, they are not unjustified what they have done is make sure everyone can mortgage a house, sales of prime residence due to transfer unforeseen reasons in not taxed, it is the investment purpose of property which is highly taxed, mortgage there is for 30 years normally, imagine a parent purchasing a house at the age of 34 average @$100,000 lived to the age of 86 at the time of death passed on the house to the child @market value of $1,000,000. Child has his own house now $900,000 will be taxed @tax bracket of the child, thus discouraging holding more than one property and the gain has been made without giving anything in return to the country. Here billions of worth property is passed on to children who already have made enough billions of their without any benefit to the country this should be the target for tax collection. I am not a fanboy of western systems at-least not in my age and with my exposure, US laws have few things which i appreciate the law, the intent to propose this law by the legislator/regulator, purpose of the law and interpretation of the law its the highlighted one which convinced me about them, besides property laws in pakistan are against demand/supply curve and Islamic laws-spirit not the intent)

For example consider my own case. I am living in my parents house and given the prices of the house I cannot purchase one on my own. So i decided to purchase two flats on installments and waiting for completion of installments so that I can bought a bigger house of my own from the proceeds of the two flats. However, if you tax me on those two flats then I will never be able to buy a bigger house.

However, on the other hand person buying houses as a business should be taxed therefore, government has rightfully taxed the houses if sold within a certain period of purchase. By this way they will tax those who are using real estate as a business but will not tax the actual buyer who want to live in a house. Remember taxation is on earning not on consumption. I have already paid tax on my income which I am saving for buying my own property for my residence. If you tax me on this, it will not only be double taxation but counter productive as people will not be able to buy houses which is negative for an increasing population.

Can you please share the reference of US laws so I can study them.

Here I will disagree because here you are taxing deemed income. Although apparently the value of property increases from 100K to 1000K but in actually the commodity remains the same i.e. a single house and it is just the deflation of currency or time value of money.

Dynamics of Western society is totally different then ours. For example the rate of population growth (excluding immigrants) is negative. It means that actually the requirement for houses is on a decrease and therefore they can tax as the son actually in no need to buy a house but on the contrary we having a population growth of more tahn 2% having average kids size of 4 in each house means our family in its next generation needs 2 houses. Now if you tax the inheritance and he has to save money our of already taxed money then how will he manage to buy a new house?

Remember, it is against basic principle of taxation. Taxation is on income and not on consumption so how can you tax consumption ?

Furthermore, it is important to note that we already have property taxes implemented in Pakistan which is other than income tax. Rent income is also taxable. So a person having more than one house is paying tax. A person getting renatl income is paying tax. Issue is with the person involved in trading of real estate. He is not paying tax.

 

[ps3linux]

Can you please share the reference of US laws so I can study them.
.

It is chapter 12 estate and gift taxes. Unified codes should be between 2001 and 2800. It's much too big to be pasted here, I have the hard copies only not the soft ones. 19 volumes each around 1000+ pages

It should be at least one complete volume with a price tag of $100+ compiled ones

But you can search chapter 12 on I.R website. Found them on cornell uni website:

https://www.law.cornell.edu/uscode/text/26/subtitle-B

Although the compiled versions have the intent and purpose, summary and application for each unified code (here the equivalent term is section of income tax ordinance)

For rest of your earlier post regarding my suggestion, they require deep understanding of the economics, intent & purpose of western estate tax laws also economic resources like real estate's dynamic don't change much with the country land of each country will remain the same if few people posses most of the land the value will increase and most people will not be able to afford or buy basic economic which is the case in pakistan, there is no point for me to continue on that topic.

 

[The Accountant]

It is chapter 12 estate and gift taxes. Unified codes should be between 2001 and 2800. It's much too big to be pasted here, I have the hard copies only not the soft ones. 19 volumes each around 1000+ pages

It should be at least one complete volume with a price tag of $100+ compiled ones

But you can search chapter 12 on I.R website.

Thanks

 

[ghazi52]

Federal Budget with a total outlay of 7022 billion rupees for the next fiscal year, containing relief for the poor and measures for economic stabilization and fiscal discipline, has been announced.

Minister of State for Finance Hammad Azhar presented the budgetary proposals in the National Assembly on Tuesday evening.

The resource availability during the next fiscal year has been estimated at 7899.1 billion rupees against 4917.2 billion rupees in the budget estimates of the outgoing fiscal year.

The gross revenue receipts are estimated at 6717 billion rupees, showing an increase of 18.7 percent over the budget estimates of outgoing fiscal year.

After the share of provinces in gross revenue is transferred, the net review of federal government has been estimated to be about 3463 billion rupees for the next fiscal year.

The provincial share in federal taxes is estimated at 3254.5 billion rupees during the next fiscal year, which is 25.7 percent higher than the budget estimates for the outgoing year.

The tax revenue for the next fiscal year is estimated at 5822,160 million rupees, which reflects an increase of 33 percent over revised estimates of the current fiscal year.

Out of this, the FBR collection target is 5550 billion rupees, which will be 12 percent of the GDP.

The Minister of State announced ten per cent ad-hoc relief for the government employees from one to sixteen scales and all personnel of the defence forces.

Five per cent increase has been announced for public sector employees of 17 to 20 grades, while no increase has been made in the salaries of the government employees of 21 and 22 grades.

He also announced increase of ten per cent for all the pensioners.

Minimum wage has also been increased to 17500 rupees.

The conveyance of disabled persons has been increased to 2000 rupees from 1000 rupees while special allowance of private secretaries attached with ministers and parliamentary secretaries has been enhanced to 25 per cent.

The Minister of State said the Cabinet members have voluntarily agreed to 10 per cent cut in their salaries.

Hammad Azhar said the PTI government came to power with new vision and commitment and to bring change in the lives of people, ensure merit and protect the vulnerable segments of the society.

The government took a number of steps to correct the course of economy.

Import duties were increased and imports reduced from 49 billion dollars to 45 billion dollars. Remittances increased by 2 billion dollars.

Circular debt was reduced by 12 billion rupees per month and it was brought down to 26 billion rupees from 38 billion rupees. Financial aid from China, UAE and Saudi Arabia helped stabilize the economy. Incentives for export sector were increased for three more years.

He said a program of 6 billion dollars has been agreed with IMF. This will help us gain 2 to 3 billion dollars loan more at very economical rates. Oil payment deferred facility from Saudi Arabia will also help reduce pressure on the government.

Seven billion dollars reduction in Current Account Deficit will be achieved this year, which will be 6.5 billion dollars next year.

The Asset Declaration Scheme will bring the undeclared assets into mainstream and help increase revenue of the government.

Tax policy has been separated from tax administration. Pakistan Banao Certificates were issued in order to provide benefit to Overseas Pakistanis to invest in Pakistan.

Billion Tree Tsunami and Clean and Green Pakistan initiatives were launched. In order to bring FATA into mainstream, special effort has been made.

He said in Naya Pakistan, the culture of tax evasion will be overcome. Civil and Defense authorities have agreed to voluntary reduce in their budgets.

Their budget has been reduced from 460 billion rupees to 437 billion rupees.

On protection of vulnerable segments of society, the Minister of State said a subsidy of 216 billion rupees will be earmarked for 75 percent consumers using less than 300 units of electricity.

The government has constituted a new ministry for the poverty alleviation.

A new ration card scheme for one million people is being launched to provide nutritious food to children and pregnant women.

He said 80,000 people will be provided interest free loans every month.

Five hundred Kafalat Marakiz will be set up and disabled persons will be provided with assistive aids.

Ehsaas homes will be constructed for elderly people.

The quarterly stipend of 5000 for BISP is being increased to 5500 rupees.

In 50 districts, girls' stipend money is being increased to 1000 rupees from 750 rupees, besides expanding this service to 100 districts.

He said Sehat Sahulat Cards will be provided to 3.2 million people in 42 districts, while in the second phase 15 million people will be provided with these cards across the country including the tribal districts and Tharparkar.

Hammad Azhar said 93 billion rupees are being allocated for education, nutrition, health and clean drinking water.

The Minister of State said the government will not get loans form State Bank of Pakistan and we will focus on good governance and eradication of corruption.

He said 200 billion rupees have been proposed for rail and roads; out of which 156 billion rupees will be spent through National Highway Authority.

For energy, the Minister of State said 80 billion rupees are being recommended; out of which 55 billion rupees have been earmarked for Dasu Hydropower project.

He said 60 billion rupees have been allocated for human development, and a record fund of 39 billion rupees has been allocated for higher education.

The Minister of State for Finance said an amount of 10.4 billion rupees for second phase of Quetta Development package will be earmarked as part of development of Balochistan.

He said a sum of 45.5 billion rupees will be spent on nine development projects in Karachi.

Hammad Azhar said employment creation is an important priority area of the government as Pakistan is a country of youth and the number of young people is rising.

He said 28 industries will benefit from 5 million housing program of Prime Minister Imran Khan and create a number of jobs for the youth.

He said work on this project is gaining pace and land has been acquired in Islamabad, Lahore and Faisalabad.

He said the Prime Minister has already inaugurated the project of constructing 25000 housing units in Rawalpindi/Islamabad and 110000 units in Balochistan.

The state minister said loans worth 100 billion rupees will be granted to youth to start their businesses under Kamyab Jawan Program.

The Minister of State said the government is giving incentives and subsidies for the promotion of industrial sector in order to create employment opportunities for the youth.

The steps include 40 billion rupees each subsidies for energy and export sector.

He said the government will maintain the long-term trade financing facility for the industrial sector.

The Minister of State said the government is commencing 280 billion rupees five year programme for the uplift of agriculture sector.

On agriculture tube wells, 6.85 rupees per unit subsidy will be given to the farmers.

The federal and Balochistan governments have started a joint scheme with a ratio of 40:60 for the farmers of Balochistan.

Under this scheme, monthly bill of 10,000 rupees is received from the farmers while the remaining burden of 75,000 rupees is being borne by both the governments.

He said the government is also providing insurance scheme to small famers in case of destruction of their crops due to any calamity.

For this purpose, the new budget envisages an amount of 2.5 billion rupees.

Hammad Azhar said the government will introduce a comprehensive programme for the restructuring of the state institutions in order to improve governance and reduce burden on the national exchequer.

This year, he said, two LNG-powered power plants and some small organizations will be privatized, which will help generate 2 billion dollars.

He said contacts have been made for foreign investment in Pakistan Steel Mills.

Hammad Azhar said the main focus of the development budget is water related projects including dams.

For this purpose, seventy billion rupees have been earmarked.

Twenty billion rupees are being allocated for the land acquisition of Diamer Basha Dam and fifteen billion rupees for Mohmand Hydro power project.

About rail and road infrastructure projects, the Minister of State said that multi-billion dollar China Pakistan Corridor Project will be given due focus about two hundred billion rupees are being earmarked for this purpose.

Out of this amount 156 billion rupees will be spent through National highway Authority.

Giving a breakdown of road infrastructure, he said twenty four billion rupees are being allocated for Havelia-Thakot, thirteen billion rupees for Burhan-Hakla motorway and nineteen billion rupees for Sukkur-Multan section of Peshawar-Karachi motorway.

In addition, Swat expressway will be extended from Chakdara to Bagh Deheri under public private partnership.

Sambrial-Kharian Motorway will be constructed while dualization of Mianwali-Muzafargarh road will also be carried out.

The Minister of State for Finance said 58 billion rupees are being allocated in the budget for the human resource development.

He said health, education, development targets and coping with climate change are amongst our priorities. For this purpose, funds will be earmarked.

The Minister of State for Finance said our aim during the financial year 2019-20 will be to increase the tax net.

Regretting the low tax to GDP ratio, he said the country cannot make progress without payment of taxes.

He appreciated the gesture of both the civilian government and the military leadership for voluntarily deciding to cut their expenditures.

He said the civil expenditures will be reduced by five percent from 460 billion rupees to four hundred and thirty seven billion rupees.

The defense expenditure will be maintained at 1150 billion rupees.

The Minister of State said we are firm for the defense and sovereignty of the country, and no compromise will be made on the defense capability of the country.

Given the current economic situation, Hammad Azhar said the government has acted with responsibility and taken steps for the economic stabilization.

We have increased import duty which helped us bring down imports from forty nine billion dollars to forty five billion dollars.

He said remittances have witnessed an increase of two billion dollars.

He said the IMF package will also help the country steer the economy towards stability.

Government did not opt the option to increase General Sales Tax at the rate of 17 percent to collect revenue.

The Minister said it has been recommended to decrease the sales tax on brick kilns from existing rate of 17 per cent and to replace it with in accordance with space and capacity.

It has also been proposed that sales tax on bakeries and restaurants be reduced from existing 17 percent to 7.5 percent.

The Minister recommended to impose a uniform tax rate of 10 percent on milk, cream, dry milk and unflavored milk.

Hammad Azhar said exemption on provision of power industries in erstwhile tribal areas has been extended to industrial raw material and import of plant and machinery.

In the new budget, it has been proposed to impose 17 percent Federal Excise Duty as sales tax on various steel products.

The budget envisages increase from 64.80 rupees per kilogram to 74.04 rupees per kilogram in the rates of CNG for dealers of value region I.

In region II, rates have been increased from 57.60 rupees per kilogram to 69.57 rupees per kg.

The budgetary proposals ask for increase of sales tax on sugar from existing 8 percent to 17 percent which will likely to raise the price of this commodity by mere 3.65 rupees per kilogram.

A seventeen percent sales tax has been recommended on semi processed and cooked products of chicken, mutton, beef and fish.

Seventeen per cent sales tax on marble industry has also been in the federal budget.

In order to discourage the consumption of sugary drinks, federal excise duty has been proposed to be 14 percent from existing 11.25 percent.

It has been recommended that the Federal Excise Duty on cooking oil/ghee be increased to 17 percent.

The FED on cement should be increased from existing 1.2 rupees per kg to 2 rupees per kg.

The budget proposals introduce 2.5 percent FED on 1000 cc cars, 5 percent on up to 2000 cc and 7.5 percent on more than 2000 cc cars.


The upper slab of FED on sale of cigarettes has been increased from 4500 rupees to 5200 rupees for 1000 sticks.

A tax rebate has been proposed for those employers who will provide jobs to fresh graduates.

Tax limit on salaried class has been set at 600000 rupees per annum while it will be 400000 rupees per annum for non-salaried class.

It has been proposed that tax rate for companies should be fixed at 29 percent for the next two years.

Hammad Azhar said the government believes that rationalization of Customs Tariff is important to promote exports and manufacturing sector.

He said the government is finalizing a reforms package for the Customs tariff, which will be implemented in a phased manner.

He said textile machinery and its parts will be exempted from duties to give impetus to this important sector of the economy.

He said raw material used for the production of paper will also be exempted from Customs duty.

He said duty on different types of paper is being reduced to 16 per cent from 20 per cent, which will help bring down the prices of books in the country and encourage the printing industry.

Special measures are also being taken for the publication of Quran.

The Minister of States said different schemes are being simplified to promote exports. He said incentives worth 124 billion have been given to the industrial sector under different schemes during the first 11 months of the current financial year.

The Minister of State said duty on wood is being brought to zero from three percent in order to protect the domestic forests and encourage the manufacturers of furniture.

Duty on artificial panels of wood is also being reduced to 3 per cent from 11 per cent. He said plant and machinery used in the big industries for refining oil is also being exempted from duty.

There is a proposal to exempt 19 basic items of raw material used in production of medicines from three percent duty.

The new budget envisages total development outlay of 1,863 billion rupees for the next fiscal year.

The size of federal Public Sector Development Programme has been set at 951 billion rupees, which also includes foreign assistance of 127 billion rupees.

Besides, an amount of 912 billion rupees has been allocated for provincial Annual Development Plans.

During the next fiscal year, the government plans new initiatives such as District Equalization Plan, interventions in the agriculture sector to ensure food security, prioritization of construction of mega dams for water conservancy, interventions in the field of knowledge economy and skilled development on the youth.

An amount of 210 billion rupees has been earmarked to implement various physical planning and housing initiatives including Urban and Regional Planning Framework, Smart City Plans and Integrated Strategic Development Plans, including Prime Minister's Naya Housing Programme and slum upgradation programme.

Similarly, interventions in the conservancy of environment and improvement in environment through Clean and Green Pakistan and Ten Billion Tree Tsunami Programmes have been initiated.

The PSDP allocation for Climate Change Sector has been kept at 1102 million rupees for the next fiscal year.

The National Agriculture Emergency Program intends to spend 290 billion rupees in the next five years to boost the sector.

The programme will be executed with the coordination of all provinces to ensure productivity of major crops, including wheat, sugarcane, cotton, rice, oil seed crops, improvement of water use efficiency and promoting high value fish farming.

It also includes calf saving and promoting backyard poultry.

An amount of five billion rupees, including foreign aid of 2.4 billion has been allocated for the governance sector in the next fiscal year. Capacity of public sector will be enhanced for improved public service delivery.

The budget proposes allocation of 63.5 billion rupees for special areas including merged districts of Khyber Pakhtunkhwa, Azad Jammu and Kashmir and Gilgit Baltistan.

Further, a special allocation for 75 billion rupees will be provided for equitable Regional Development in order to accelerate development of less developed areas.

The annual plan aims to improve the capacity of IT sector by enhancing infrastructure facilities, improving skill quality of human resource and accelerating implementation of public E services for citizens.

In the upcoming year, special emphasis will be made towards a robust advocacy and awareness campaign for adoption of family planning services and encouraging financing of population sector projects.

Higher Education Commission has been allocated an amount of over 28,646 million rupees for the ongoing and new schemes in the next fiscal year.

Allocation for the projects proposed by "Task Force on Technology Driven Knowledge Development" will be in addition to regular HEC budget.

The HEC budget will be used to transform the universities into world class institutions and encourage innovative ideas of researchers.

Ministry of Science and Technology has been allocated an amount of over 6231 million rupees.

This includes 921 million rupees for ongoing and 5310 million rupees for new projects.

The government's planned initiatives for employment and skill development during the next year will help alleviate unemployment in the country.

The plan focuses to provide and promote technical and vocational training by extending geographical access through the public private partnership in market demand trades.

In the health sector, the key initiatives to widen the coverage of health care spending and achieve health targets include increase in the number of paramedical staff, expansion of lady health workers programme, strengthening of primary healthcare with backup of skilled personnel including women, medical officers in basic health units, establishment of health emergency surveillance and response system, implementation of a national plan for vaccination and establishing a health information and disease surveillance system.

Micro health insurance schemes will be made part of existing social safety nets to extend health coverage to the vulnerable segments of the society.

An amount of over 516 million rupees has been allocated for digitization of production and transmission infrastructure of Pakistan Television and Radio Pakistan with thrust on reaching out to far-flung areas of the country.

The services of Radio Pakistan will be expanded to the uncovered areas.

An amount of over 128 million rupees has been allocated for conservation and promotion of rich and diverse cultural heritage of Pakistan.

The annual development plan also envisages upgradation of power transmission and distribution system in order to reduce line losses and check power theft.

Since construction of large take substantial time, quick alternatives will be adopted like construction of medium and small dams.

Out of total water sector's development budget, amounting to 71.9 billion rupees, an amount of about 56.5 billion rupees has been proposed for system augmentation for the next fiscal year.

An allocation of over 237 billion has been made for development programme of Transport and Logistics sector.

Giving an overview of the economic situation when the PTI government came to power, Minister of State for Finance Hammad Azhar said the country was facing overall debt of 31000 billion rupees including 97 billion dollars of external debt.

The foreign exchange reserves had dropped to 10 billion dollars.

He said trade deficit was 32 billion dollars while current account deficit touched 20 billion dollars all due to financial mismanagement of the previous government.

Circular debt had reached 1200 billion rupees at a rate of 38 billion rupees per month.

A loss of 1300 billion rupees was being faced by public sector institutions. This was unsustainable and as a result the rupee started falling in December 2017.

Minister-in-Charge for Finance, Revenue and Economic Affairs Hammad Azhar introduced "The Finance Bill, 2019" in the National Assembly.

The Bill is aimed at giving effect to the financial proposals of the Federal Government for next fiscal year and to amend certain laws.

The House has been adjourned to meet again on Friday at 10:30 a.m.

Earlier, the Federal Cabinet meeting chaired by Prime Minister Imran Khan today gave approval to the budgetary proposals for fiscal year 2019-20.

The cabinet discussed the proposals that focused on economic stability and sustainable growth, with an emphasis on austerity, revenue generation and uplift of down-trodden.

Meanwhile, People belonging to different walks of life especially businessmen and industrialists have hailed Federal Budget for the next fiscal terming it a a good omen for solution of current economic crisis.