Added to the expected rise in salary of government employees of around 15 percent, the widened tax exemption will make life easier for salaried and middle-income groups reeling under the highest price rises in 17 years.
Interestingly, the rise in tax ceiling will have little impact on the overall revenue mobilization as increased mobilization of income tax resulting from salary hike will compensate for any loss. However, service sector professionals aspiring to climb the financial ladder are going to face the tax axe.
The new budget will make registration of PAN (permanent account number) mandatory for service sector employees and professional consultants, thereby subjecting them to close scrutiny by the revenue administration. “The budget will also make items that reflect higher social status such as automobiles more expensive,” said a senior government official.
Through PAN registration the state mainly aims to tighten its grip on professionals providing multiple consultancy services but are getting away with a 15 percent tax contribution.
“Unlike in the past when revenue policy spurred consumption, the new revenue policy will tilt more towards stimulating domestic industry and exports,” the official told myrepublica.com.
He disclosed that large-scale infrastructure projects will get special tax concessions while the export sector will also get support in the form of ´procedural simplification´.
The new tax policy will mainly aim to spur ´employment generation´, which will have top priority in the budget, said the official, indicating also that key infrastructure projects could get VAT concessions.
The new budget will likewise focus on expanding the tax base and luring foreign investment.
Under expansion of the tax base, the budget is setting an ambitious target of adding 200,000 new taxpayers to the present 337,000 registered in the country.
The new budget will vow to get tough on VAT implementation and mainstream excise duty, which generates 12 percent of revenue, by establishing administrative and functional linkages between excise duty, VAT and income tax.
Keeping in mind huge leakages in rental tax, the government will enforce a ´reference price´, which will serve as the lowest rental contract amount, and slap house/land rental taxes on that basis.
The budget will promise to enhance service delivery and transparency in revenue administration. Under this, the government will open electronic filing of tax assessments and allow e-payment of income tax.
It will also announce establishment of new tax collection centers in districts outside the Valley.
In remote districts, where both Inland Revenue Office outlets and collection centers are absent, the government will delegate authority to the District Comptroller´s Office to collect income tax and VAT apart from excise duty, and to register and issue PAN to new taxpayers
milan@myrepublica.com
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