PTBA suggests 5-year policy for gradually reducing sales tax rate

PTBA suggests 5-year policy for gradually reducing sales tax rate

KARACHI: Pakistan Tax Bar Association (PTBA) has suggested gradually reduction of sales tax rate under five-year policy and for first year the sales tax rate should be brought down to 15 percent from next fiscal year.

In its budget proposals for 2019/2020, the PTBA said that present rate of Sales Tax at 17 percent with 3 percent value addition tax on commercial importers is too high.

It said that there is a narrow tax base due to the high rate which induces tax evasion, under invoicing, corruption and smuggling.

The PTBA proposed that this year as a first step Sales Tax Rate may be brought down to 15 percent and five year policy may be announced for reduction of rate of tax by 1 percent every year.

Moreover, same rate of value addition tax (i.e., 3 percent) may be levied on luxury goods which are expected to be sold at a higher value addition in the local market as compared to other goods.

“Higher value addition tax should be levied on import of luxurious items such as cosmetics, shampoos, cars, etc.”

It said that the proposed amendments would assist in the expansion of tax base, reduction in smuggling and corruption, rise in government revenues and increased competitive edge and promotion of documentation of economy.

Furthermore, the reduced tax rate will encourage the unregistered persons to get themselves registered, resulting in broadening of tax base.

Higher value addition tax on luxury goods will not only generate additional revenue but will discourage import and also support the local industry.