Tax credits for salaried class demanded

KARACHI: Tax professionals on Monday sought tax credits on various expenses for salaried class to provide them with relief in the upcoming budget for fiscal year of 2019/20.

Ali Rahim, director of public accounting and consulting firm Baker Tilly said there is an excessive tax deduction from salaries. Rahim advised the tax authorities to allow tax credits to salaried individuals on housing loans.

He was addressing a pre-budget seminar organised by the Karachi Tax Bar Association to formulate tax proposals for the next fiscal year.

Rahim further demanded amendments into the Income Tax Ordinance 2001 to allow tax adjustment for deductible allowance on account of zakat, allowance for payment of profit and education expenses. Salaried individuals should be allowed tax credit against taxes withheld under any section of the ordinance, he added. Baker Tilly’s official sought withdrawal of an amendment into the Finance Act 2013 to set off losses against property income.

In case of withholding tax on services, goods and contracts should be exempted for filers of income tax returns, he said. “This would increase burden on non-filers and broaden tax base.”

Rahim said deduction of advance tax on payment of foreign education made through credit, debit or prepaid cards should be withdrawn in case of return filers. Late filers should be considered as filer after payment of penalty on late filing.

Saud-ul-Hassan, tax director of EY Ford Rhodes Chartered Accountants said distortion in value-added tax (VAT) system should be removed and a full-fledge VAT regime be adopted. VAT system was adopted for documentation of the economy.

The sales tax law is a blend of exemptions, zero-rating, subsidised or reduced rates. Sales tax law also contains fixed tax regime, extra tax, further tax and value addition tax. Hassan said the uniformed VAT system would provide a level-playing field for all the registered individuals.

It is further recommended that the sales tax should be reduced to 15 percent and gradually to 10 percent from existing 17 percent. It is also recommended to harmonise sales tax on goods and services collected by federal and provincial governments. Mazhar Saleem Shah of KPMG Taseer Hadi & Co. presented issues related to sales tax on services within the jurisdiction of Sindh Revenue Board.