PERFORMANCE OF TAX COLLECTION DUTY AT THE UNION COUNCIL LEVEL BY THE CENTRAL BOARD OF REVENUE FOR EFFECTIVE TAX COLLECTION.

Who is to be taxed?

                   Income tax shall be imposed for each tax year, on every person who has taxable income for the year.

What is taxable income?

                   The taxable income of a person for a tax year shall be the total income of the person for the year reduced by the total of any deductible allowances of the person for the year.

What is total income?

                   The total income of a person, for a tax year shall be the sum of the person's income under each of the heads of income of the year.

Heads of income are following,

(a)            Salary;

(b)            Income from property;

(c)             Income from business;

(d)            Capital gains; and,

(e)            Income from other sources.

(1)            Tax is properly deducted from the salaries of both the Government Servants and those who serve in any private institution because these institutions are on the record of the Government and they cannot escape from the tax net. That is why deductions are made whether large or small from their salaries despite this that they lament of the small salaries given to them every month which do not make their requirements in prevailing price-hike conditions.

(2)            Income from property: The rent received or receivable by a person in a tax year shall be chargeable to tax in that year under the head "Income from property".

Subject to sub-section (3) of Section 15 of the income tax Ordinance 2001, "rent" means any amount received or receivable by the owner of land or a building as consideration for the use or occupation of or the right to use or occupy the land or building, and includes any forfeited deposit paid under a contract for the sale of land or a building.

(3)            Income from business:

(1)            The following incomes of a person for a tax year shall be chargeable to tax under the head "Income from Business".

(a)            the profits and gains of any business carried on by a person at any time in the year;

(b)            any income derived by any trade, professional or similar association from the sale of goods or provision of services to its members;

(c)             any income from the hire or lease of tangible movable property;

(d)            the fair market value of any benefit or perquisite whether convertible into money or not derived by a person in the course of or by virtue of, a past, present, or prospective business relationship; and

(e)            any management fee derived by a management company (including a modaraba).

(2)            Any profit on debt derived by a person where the person's business is to derive such income shall be chargeable to tax under the head "Income from Business" and not under the head "Income from other sources".

(4)            Capital Gains: A gain arising on the disposal of a capital asset by a person in a tax year shall be chargeable to tax in that year under the head "Capital Gains".

(5)            Income from other sources: Income of every kind received by a person in a tax year, shall be chargeable to tax in that year under the head "Income from other sources", including the following namely,

(a)            Dividends;

(b)            Royalties;

(c)             Profit on debt;

(d)            Ground rent;

(e)            Rent from the sub-lease of land or a building;

(f)              Income from the lease of any building together with plant or machinery;

(g)            Any annuity or pension;

(h)            Any prise bond, or winnings from a raffle, lottery or cross-word puzzle;

(i)               Any other amount received as consideration of provision, use or exploitation of property, including from the grant or a right to explore for, or exploit natural resources;

(j)              The fair market value of any benefit, whether convertible to money or not, received in connection with the provision, use or exploitation of property; and

(k)            Any amount received by a person as consideration for vacating the possession of a building or part thereof, reduced by any amount paid by the person to acquire possession of such building or part thereof.

Insurance Business:

The profits and gains of any insurance business shall be computed in accordance with the rules in the Fourth Schedule to this Ordinance.

Tax payable on oil, Natural gas and other Mineral Deposits shall be computed in accordance with the rules in Part I of the Fifth Schedule to this Ordinance.

The main purpose of the above narration was to show the readers, in brief, the heads of taxes. Only one class i.e. the salaried class deposits the tax in full and regularly. The need is to bring the other areas of income and the persons in the tax net properly by appointing persons at the Union Council by the Central Board of Revenue for the effectively collecting the tax by involving the Nazims Union Councils legally to help the CBR officials and the general people then should have approach to the record of the CBR for finding out the names and the amounts paid by them as taxes. Every record should be available at the Union Council.

The tax collection, at present is not as effective as it should be to bring every individual of society to pay tax. When the salaries of the servants are, so effectively subjected to tax then why other persons be not taxed and be made accountable for their sources of income?

At present, the fiscal policy is such that the rich becomes richer while poor becomes poorer and that is why the burden on poor increases with every passing day. In my opinion, the self assessment scheme in the collection of taxes is nothing but to leave the tax payment on the rich class of society and to legally set them unrestrained whether to include themselves in the tax net or not. The result is that the worst sufferer is the consumer and common person. The concept of income tax is that those whose income exceeds a certain limit prescribed by the Government should pay the income tax. Government deduct every kind of tax from the salaries of the salaried class because their income is already registered with the Government. What about those people who are privately sucking the blood of the people and have made sufficient movable and immovable properties.

                   The Central Board of Revenue should appoint its officers in each Union Council of the Country and his job should be primarily to find out those persons living in the jurisdiction of the Union Council able to pay tax and are not paying tax either on one reason or other and then prepare annually a list of those persons who have businesses, properties, factories, business markets, plots for sale, etc, and then submit the list to the Nazim Union Council for receiving his Certificate to the effect that the list contains the names of all those persons who are liable to be brought in the tax net and that no name of any person who is eligible to be tax has been omitted.

                   Every person living in the jurisdiction of the Union Council should be free to examine the list and should have a right to sue both the officer of the CBR and the Nazim for wrongly entering his name in the list. If the Nazim concealed/omitted the name of any person living in the jurisdiction of his Union Council, he should be prosecuted and convicted for the concealment of real facts and giving false Certificate.

                   The concept of Sales Tax on electricity, gas and other items used for domestic purposes should be abolished. Every thing used domestically should be exempted from those charges/taxes, which are levied on the Commercial use of those items. It will decrease burden of taxes on the poor and low income segment of society.

                   If the CBR acted efficiently at the level Union Council by appointing its officers and increased the number of taxable persons in the Tax net, it will surely increase the Government Revenue while the poor will also take a sigh of relief when the number of taxes or their amounts are decreased on them.

                   Indirect taxes on consumer items are taking the right of living from the poor and the unemployed class and the Government can give relief at least by minimizing the number of taxes or their amounts on the people.

                   On one hand everyone claims that Pakistan is rich in natural resources but on the other hand links even the natural resources of Pakistan with prices of the international markets then what is the benefit of the domestic natural resources to the common person when the production of the land of Pakistan is linked with foreign countries.

                   The cry of Provincial Autonomy is weighty for the reason that WAPDA on one hand did not produce one mega watt of electricity but on the other hand did not pay the arrears of Rs. 700 Billions to NWFP. WAPDA increased the rate of electricity per Unit but did not utilize the amount earned in reducing the curse of load-shedding. Where the amount was spent?

                   The sole purpose of the above article is to minimize the burden of taxes on low income class and to find out ways and means for the improvement of the quality of life either by Amendments in the Constitution, making necessary legislation, devolution of powers, making arrangement for reducing the hardships of the people.

                   All these demands the Sincerity of the political parties, their devotion to the cause of poverty alleviation, firm commitment to good governance and excellent working relationship among the Institutions of the State. Mere adherence to the one issue at the expense of all others will kill the purpose of February 18 election and the nation will feel very soon the need of another election for the solution of their own problems.

Manzoor Ahmad

B.Sc; L.L.B M.A. Political Science,

Marghuz Balar Khel, District Swabi, N.W.F.P. Pakistan.

Mobile No: 0345-9503142.

Dated: Thursday, 10 May 2008.

Email: manzoorahmadjalalmallb@hotmail.com