Business

Pakistan plans cuts in income taxes and hike in revenues for the new budget year

Pakistan plans cuts in income taxes and hike in revenues for the new budget year

March 18, 2018 | 10:10 PM
A worker inspects fabric on looms a textile manufacturer in Karachi (file). The Pakistan government plans to enhance to Rs4.5tn the revenue collection target as well as a cut in income taxes in the new federal budget for the new fiscal year, which begins on July 1.
The Pakistan government plans to enhance to Rs4.5tn the revenue collection target as well as a cut in income taxes in the new federal budget for the new fiscal year, which begins on July 1.The Federal Bureau of Revenue (FBR) has been tasked to prepare the first draft of tax relief and revenue measures by the end of March, official sources here say. The government has already set April 27 for the announcement of the federal budget 2018-19.Sources in the Ministry of Finance say FBR is working on various proposals to support 15% growth in revenue collection in 2018-19. These measures will also take into consideration impact of GDP growth and inflation.The FBR expects to collect around Rs3,900bn by the end of this fiscal year on June 30, which will be almost twice of the tax revenue when the incumbent Pakistan Muslim League-N government came to power in 2013.The FBR has reportedly been tasked to find resources for 15% increase in revenue collection. The revenue measures will move around changes in tax rates, especially in withholding tax (WHT).“We are working on proposals to enhance WHT rates for non-filers,” an official said. The scope of these withholding taxes will also be extended to a maximum number of sectors, he added.The government has imposed 20 new WHTs since June 2013 while increasing the rates for non-filers on the pretext of improving tax compliance. The number of WHT categories has risen to 56 from 36 since June 2013. Resultantly WHT equals over 70pc of total direct taxes. Other potential areas where taxes will be raised include regulatory duties on non-essential and luxury items. Moreover, the FBR has also identified several items, which imports have surged due to free or preferential trade agreements, for imposition of regulatory duties. In consultation with stakeholders, the board has also developed a list of those products, which will be subject to regulatory duties in a bid to provide protection to local industries.Rates of sales tax and federal excise duty will also be rationalised. “We are also working on administrative measures to shore up revenue collection in all taxes,” the official said, adding that maximum impact on revenue collection will be from administrative measures.Tax officials also believe that the expected depreciation of the rupee in the next fiscal year may also lead to higher revenue collection.The tax authorities are also working on three proposals – raising exemption limit, reducing tax rate for individual taxpayers and introduction of simplified return form.It is proposed to enhance the basic income tax exemption limit to a minimum of Rs500,000, from the existing Rs400,000 for the salaried class.However, final decision will be taken following consideration whether the increasing limit did not impact the total numbers of return filers.Various options are under consideration regarding the slashing of tax slabs for individual taxpayers. Currently, the highest income tax slab of 35pc was applicable to income of individual taxpayers.
March 18, 2018 | 10:10 PM