KARACHI: Income tax collection from salary persons has fallen sharply by 43 percent in fiscal year 2018/19 due to incentive granted by the previous PML-N government, sources said on Friday.
Collection under the head of salary declined to Rs76.44 billion during fiscal year 2018/19 as compared with Rs133.4 billion in the preceding fiscal year.
In the 2018/19 budget, the government announced major relief to the salaried class by allowing reduced rate of tax to salaried persons driving income up to Rs1.2 million.
Further, the fixed tax regime was implemented through Finance Act, 2018 as salary persons having income up to Rs400,000 were exempted from the tax. However, persons deriving income up to Rs800,000 were subject to Rs1,000/year and likewise persons deriving income between Rs800,001 to Rs1,200,000 were subject to tax at Rs2,000/year.
The FBR sources said the previous government had announced this major relief in the wake of general elections that were held in July 2018. The incumbent government instead retained the tax slabs for salaried persons in its subsequent two supplementary budgets.
Sources said that due to such measures in the budget 2018/19, the Federal Board of Revenue (FBR) had failed to shore up revenue and failed to achieve even preceding collection numbers. The FBR provisionally collected Rs3,820 billion in 2018/19 as compared with the collection Rs3,852 billion in the preceding fiscal year.
The government in the latest budget 2019/20 revised the tax slabs for salaried persons in order to boost the collection. The new revenue collection target has been set at Rs5,550 billion for the current fiscal year.
As per the new tax rates for salaried persons from tax year 2020 onwards effective from July 1, 2019 the income up to Rs600,000 is exempted from tax. However, for those persons falling within the range of Rs600,000 and Rs1.2 million the tax rate is five percent of the amount exceeding Rs600,000.
According to breakup, collection of income tax from salaried persons in the federal government fell by 59 percent to Rs6.15 billion in 2018/19 as compared with Rs15.04 billion in the preceding fiscal year.
The collection of tax from government employees other than federal government also fell by 57 percent to Rs7.8 billion during the fiscal year under review, as compared with Rs18 billion in the preceding fiscal year.
It is important to note that federal and provincial governments had announced 10 percent ad hoc relief to the government employees.
The collection of tax from salaried persons in the private sector exhibited 38 percent decline to Rs62.45 billion as against Rs100 billion during the two comparative years.
