Senate panel rejects tax reduction on salaried class

ISLAMABAD: The Senate Standing Committee on Finance has rejected reduction in tax rates on individual taxpayers under Prime Minister’s Economic Reform Package and recommended jacking up rates for higher income brackets from maximum 15 to 25 percent with possibility of pocketing Rs20 billion additional amount from salaried class.

Prime Minister Shahid Khaqan Abbasi had slashed tax rates for individual from 3o to 15 percent maximum for the highest income brackets but now the Senate committee recommended hiking of income tax rates significantly in their budget recommendations.

However, it was witnessed that the senators belonging to business class were vying for getting maximum benefits in terms of reducing tax burden and increasing incentives but they preferred to increase tax burden on salaried class but claiming that they jacked up tax rates only for higher income brackets.

The FBR has worked out that hike in tax rates would have impact of Rs20 billion additional tax proposed to be collected from higher bracket earners among salaried class.

The decision to this effect has been taken by Senate Standing Committee on Finance and Revenues which held its meeting under chairmanship of Senator Farooq H Naek here at the Parliament House on Tuesday.

The Senate panel has finalised all its recommendations which will now be tabled before the Upper House of Parliament for endorsement and then it will be forwarded to the National Assembly.

The Senate panel decided that the tax rates for first three slab proposed by the FBR in the Finance Bill 2018 will remain unchanged as where the taxable income does not exceed Rs400,000, the Board will collect zero tax. Where the taxable income exceeds Rs400,000 but does not exceed Rs800,000, the FBR will collect fixed income tax of Rs1,000. Where the taxable income exceeds Rs800,000 but does not exceed Rs1200,000, the FBR will collect fixed tax rate of Rs2,000.

The committee recommended that where the taxable income exceeds Rs1200,000 but does not exceed Rs2400,000, the rate of tax was proposed to increase from 5 to 10 percent. Where the taxable income exceeds Rs2400,000 but does not exceed Rs4800,000 the committee recommended jacking up tax rate from 10 to 15 percent.

The committee decided that where the taxable income exceeds Rs4800,000, they recommended jacking up tax rate from 15 to 25 percent.

On proposal of All Pakistan Textile Mills Association (APMTA), the Senate committee recommended to increase Regulatory Duty on import of spun yarn and man-made fiber under chapter 55 of HS code from 5 to 10 percent. Former Secretary Finance Dr Waqar Masood reminded the committee that cascading policy should be adhered to in policy formulation process.

The FBR high-ups told the committee that under South Asian Free Trade Agreement (SAFTA), the import duty on yarn was reduced to 5 percent. The APMTA’s representative Affan Aziz told the committee there was duty of 11 to 20 percent on raw material for textile sector and duty of finished products stood at 5 percent.

There were 50 units operational and 25 closed down because of negative impact of tax and duty structure as the incentives of duty was available on import of yarn. They proposed to enhance RD on spun yarn up to 10 percent and the Senate panel recommended to increase the RD from 5 to 10 percent.