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January 12, 2019

FBR likely to impose excise duty on cell phones


January 12, 2019

ISLAMABAD: With possibility of seeking Technical Assistance (TA) from the IMF to overhaul Pakistan’s dilapidated taxation system, the FBR is contemplating upon different options for slapping different rates of 5 to 10 percent Federal Excise Duty (FED) on usage of cellular phone through upcoming mini-budget to increase tax collection.

The IMF team led by Resident Chief in Pakistan visited the FBR headquarters here on Friday and continued deliberations for hours. The sources said that different tax proposals for upcoming mini budget also came under discussions.

One top official told ‘The News’ on Friday night that the government was considering different proposals to jack up dwindling tax revenues as the FBR was facing massive shortfall of over Rs160 billion in first six months of the current fiscal year. Without additional tax measures, it is simply impossible for the FBR to achieve tax target of Rs4398 billion. Now the government is planning adjustments in taxes with the intention to jack up the tax target to Rs4450 billion for end June 2019.

The Supreme Court of Pakistan had suspended collection of Withholding Tax from mobile subscribers that was causing huge losses to both the FBR at federal level and provincial revenue collection authorities at provincial levels.

“Now the FBR is considering alternate routes to slap FED on mobile usage,” said the official sources and added that the possible taxation rate would be standing around 5 to 10 percent on different level of usage. The government is also considering to differentiate FED between filers and non-filers. But it is not yet known that how the FBR will be able to ascertain that how the user earnings are more than taxable limit of Rs400,000 per annum.

The FBR is also considering to increase tax rates for imported luxury cars with capacity of 1600cc in the coming mini budget. The FBR also plans to withdraw tax incentives for salaried and non-salaried class announced by the last PML-N government.

When contacted to Spokesman Ministry of Finance Dr Khaqan Najeeb, he said that the government held consultations with all chambers, stock exchanges and other stakeholders and would consider all recommendations aimed at ensuring ease of doing business, promoting investments and boosting exports through upcoming supplementary budget 2018-19.

However, when the IMF’s Resident Chief Teresa Daban Sanchez was contacted for seeking her comments, she said that she held meeting with FBR to get through potential areas of Technical Assistance (TA) for the coming year in the area of tax and custom policy and administration.

This is part of her routine work, she added. However, official sources said that the IMF was asking Pakistan to jack up tax to GDP ratio by 5 percent bringing up to 15 percent in five years period from existing less than 10 percent of GDP at the moment.

The stagnant tax to GDP ratio has always remained problematic area for Pakistan’s economic managers and inability to fix fiscal woes struck as major stumbling block for evolving staff level agreement between the two sides.

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