Dar shoots down FBR’s tax proposals

ISLAMABAD: Finance Minister Ishaq Dar has shot down FBR’s proposals to increase tax rates on Haj operators, imposing fixed tax on international air travellers of the economy class and suspension of CNICs. However, burdens of tax incidence for non-filers in case of winning prize bonds, leasing and registration of vehicles as well as fixed tax on marriage halls will be slapped in the budget through the Finance Bill 2016-17.

The FBR is also considering to change the taxation regime on sugar as it wants to impose a fixed tax on per kg basis as sales tax against existing the eight percent federal excise duty being charged from millers. The government has also decided to bring down the Customs tariff slabs from five to four in the coming budget, but it will be a tough decision which tariff line will be abolished in the coming budget. “It's decided that all kind of machinery and raw material for installing plants will be given maximum benefits in the coming budget in a bid to promote growth and investments,” official sources confirmed to The News here on Monday.

Top economic managers confirmed the FBR proposed for enhancing minimum tax of Rs5,000 per person to Rs10,000 from Haj operators in the next budget, but the minister outright rejected this proposal.

The FBR also tabled another proposal to bring air travellers of the economy class under the tax net from the next budget. The government had imposed Rs16,000 per person tax on the first class international air ticket and Rs12,000 tax on air tickets of all other classes, excluding economy class in the last budget for 2015-16. Now the FBR made up ground for bringing the economy class international travellers into the tax net, but the finance minister refused to accept it. “[The] finance minister also rejected the FBR’s proposal to suspend CNICs for non filers,” said the sources and added that it would not serve the purpose, but he directed the FBR to come up with innovative ideas to burden more on potential non filers without creating difficulties for common people of the country.

The sources quoted Ishaq Dar as saying during the meeting, that the tax revenues of Rs10 to15 billion could be generated through such proposal, but it would send wrong signals to people of Pakistan through burdening the masses more. 

For non-filers, the FBR and government evolved consensus for increasing tax rate for prize bond winners who will not be among the list of filing tax returns. For non-filers, the car leasing business may be brought into the tax net with more rates for those who preferred to remain out of the tax net.

 In case of marriage halls, the FBR proposed to impose fixed tax on per square metre basis with the purpose to increase revenues. But FBR’s insiders say that the fixed taxation regime would cause harm to FBR’s drive for documentation of economy which is based upon basic philosophy that the income ceiling determined level of tax payment. If someone earns more, he or she should contribute more.

On reducing the Customs slabs, Ishaq Dar has made up his mind as more revenue is generated through slabs of five to 10 percent. It will be a difficult decision for Finance Minister Dar to take the final decision on this subject in the coming few days as it will have larger revenue implication for national kitty in the upcoming financial year, in which, the FBR will be required to increase its collection by Rs500 billion along with nominal growth as well as through different taxation measures to earn Rs3,601 billion for 2016-17.