Karachi : In view of reforming taxation structure, the government must reintroduce the wealth tax to bring justice in the tax system, as National Database Registration Authority (NADRA) has identified 7, 00,000 highly affluent people who are not registered in the tax net, said Kaiser Bengali, the member of National Economic Council and Former Advisor to the Chief Minister Sindh on Planning and Development.
The rich must pay tax more than the poor and those giving arguments that a Wealth Tax amounts to double taxation is not correct.
Nevertheless, nobody objects to paying property tax on property (which is stock in itself) as well as income tax on rental income (a flow),
Speaking to a press conference at Karachi Press Club, Mr. Kaiser said sales tax regime under VAT mode (Reformed General Sales Tax RGST) was unconstitutional as RGST was an integrated tax combining goods and services while collection of sales tax on goods was a federal tax and on services was a provincial subject.
Proposing suggestions, he said RGST be replaced with sales tax with the input/output adjustment and refund process. He said the tax rate on goods be reduced to 3-5 % chargeable at every stage, besides fixing tax rate on service at 10-15%, adding that tax rates could be fine-tuned on the basis of empirical analysis. Secondly he suggested that reforms be made in RGST such that VAT regime was applicable to goods only and provinces could collect sales tax on a non-refund basis, without making it a part of input/output process.
He went on to say, this proposal is likely to be criticized on the grounds that it violates the integrity of the VAT regime. However, the integrity of RGST has already been compromised by the special dispensation granted to the textile industry, which has placed it outside RGST net.
In terms of implications of business, he said if the sales tax on services is not refundable it will raise the cost of production, which is not acceptable. He proposed to reduce RGST rate on goods to 10% and services 5%. While three exceptions would need to be made for Telecommunications, Financial Transactions and Advertising for being high profit sectors.
He called for introducing Right of First Purchase to enable any private party to purchase the property on sale at a premium of roughly 15% that will curb registration of properties at below market rates. Former Advisor also suggested introducing capital gains tax on properties that are sold within, say, three years.
He highlighted that import trading suffers from under-invoicing and out-prices locally manufactures products, thus hurting local industry. He proposed to introduce Right to First Purchase to enable any private party to purchase an imported consignment at a premium of , supposedly 25% of the CIF price.