Govt mulls three taxation measures to raise Rs36bn

ISLAMABAD: The government has proposed three additional taxation measures to raise Rs36 billion and to bridge the gap created by a 10 percent salary hike and a reduction in GST on solar panels. These measures have been taken in response to IMF’s demand to avoid breaching on agreed fiscal framework for the budget 2025-26 in line with the IMF agreement.

Three new taxation measures would be incorporated into the revised Finance Bill for 2025-26 at the time of getting parliament approval. These revenue measures include Federal Excise Duty of 10pc on Day Old Chicks (DOC) of poultry sector, rate of tax increased from 25pc to 29pc on dividend received by a company from mutual fund deriving income from profit on debt, Withholding Tax to be increased from 15 to 20pc on profit on government securities paid to any person (institutional investors) other than an individual.

Although, the IMF is still not fully satisfied on the number crunching undertaken by the Finance Ministry and FBR and pressing upon tax authorities to calculate revenue impact rightly. Otherwise, the revenue gap would leave the Pak authorities with no other option but to unveil mini-budget to fill the gap.

The IMF has estimated the hike in salaries of public sector employees from 6 to 10pc would have an estimated cost of Rs29-30 billion. The import of solar panels with GST rate of 18pc envisaged to fetch revenues of Rs20 billion, but with reduction in tax rate to 10pc would have an effect of Rs6 to 8 billion.

In totality, the IMF asked the government to take additional measures of Rs36 to 38 billion to bridge the gap created through announcement of government after presenting the budget.

Details of additional revenue measures were shared by Chairman FBR Rashid Mahmood Langrial with National Assembly’s Standing Committee on Finance here on Sunday. He said new taxation measures of Rs36 billion would be taken to overcome financial gap on account of reduction in Sales Tax from 18pc to 10pc on solar panels and proposed increase in salary for government employees from 6 to 10pc.

New taxation measures would be made part of amendments to the Finance Bill. In budget (2025-26), the FBR has taken new taxation measures of Rs312 billion and enforcement measures of Rs389 billion for 2025-26.

Excluding Rs8.5 billion due to decrease in Sales Tax on solar panels, the net revenue impact of taxation measures now stood at Rs339.5 billion for the next fiscal year. The NA panel approved Finance Bill (2025-26) with the approval of certain recommendations of the Senate Committee as well as recommendations of NA Finance Committee.

The FBR chairman informed the committee there was a financial gap of around Rs35-36 billion including Rs12 billion due to increase in salary and Rs8.5 billion on account of reduction in Sales Tax on solar panels. The federal government also added some amount for distribution of revenue to the provinces under the NFC Award.

The FBR chairman said the government had shared six new taxation measures with the IMF. Out of these six measures, three have been approved by the IMF. The Finance Committee was informed a uniform tax rate of 10pc would be applicable on imported raw cotton and local cotton. Both types of cotton would now be treated at par.