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Business

September 11, 2018
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Govt set to amend finance bill to end tax incentives

Business

September 11, 2018

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ISLAMABAD: The government has decided to move amendments to Finance Bill 2018 this week in the parliament to withdraw tax incentives given to various income brackets and grant enforcement powers to tax machinery for boosting revenue collection, officials said on Monday.

“It is also under consideration to tax immoveable assets into tax net and different proposals are under consideration to go ahead with this idea,” a source told The News.

“However, in the aftermath of 18th amendments, the federal government will have to face problems to restore wealth tax.”

Official sources confirmed to The News that the federal cabinet was expected to grant approval for increasing rate of regulatory duty on almost all tariff lines and it might go ahead with the imposition of one percent hike in additional custom duty for the purpose of discouraging imports.

The regulatory duty can be increased with approval of cabinet and through issuance of Statutory Regulatory Order (SRO) with the approval of Economic Coordination Committee (ECC) of the Cabinet.

The last Pakistan Muslim League-Nawaz (PML-N) government had introduced an economic reform package under which the taxable income ceiling was increased from Rs0.4 million to Rs1.2 million with the imposition of fixed Rs1000 to Rs2000/year tax respectively and also reduced maximum rate of income tax from 30 percent to 15 percent on higher income brackets. This one step has excluded 1.2 million taxpayers from the tax net out of total 1.450 million return filers.

Officials at Federal Board of Revenue said there were 634,688 cases where taxable income was shown up to Rs0.4 million, while there were 431,452 cases where taxable income was more than Rs0.4 million but less than equal to Rs0.8 million. They added that there were 140,756 cases where the taxable income was more than Rs0.8 million but less than equal to Rs1.2 million on annual basis. It shows that around 1.2 million taxpayers were excluded from the tax net through the so-called economic reform package introduced by the previous regime.

There are only 158,250 cases of return filers, who showed their taxable income to be more than Rs 1.2 million but less than equal to Rs2.4 million. There are 40,441 cases where taxable income was shown more than Rs2.4 million but less than equal to Rs3.6 million. There are 45,278 return filers who had shown income more than Rs3.6 million/annum.

Now the government is considering bringing over Rs0.6 to Rs 0.8 million into tax net as higher income brackets need to be brought back into the tax net. The FBR had estimated that this step had the potential of incurring tax loss of Rs100 billion, but the FBR experts argued that this loss was much more than that figure.

The FBR plans to take such steps with an aim to achieve the desired tax collection target of Rs4435 for the current fiscal year against the collection of Rs3842 billion. The tax authority had revised its collection target to Rs3935 billion but it had actually fetched only Rs3842 billion. With a nominal growth in the range of over 12 percent with a possibility of revising the GDP real growth rate downward and hiking the inflationary target, the government will have to take additional taxation measures to achieve the desired collection target of Rs4435 billion for the current fiscal year.

There is also possibility that the the FBR’s target might be slashed to fix a realistic target for the current fiscal year but the rising inflationary pressures will help the FBR to materialise its desired target.

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