close
Advertisement
Can't connect right now! retry

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!
April 1, 2020

Govt to increase direct tax revenue

Business

April 1, 2020

KARACHI: The government is determined to phase out the final tax regime within the next three years to increase share of direct taxes in revenue base and expand the scope of financial audit, sources said on Tuesday.

The sources said the government prefers to tax the real income and for that to happen the final tax regime needs to be eliminated. Through the last budget, the government initiated phasing out of final tax regime and brought real estate sector and stock brokers into minimum tax regime with requirement of submitting income records and assets declaration.

Prior to the Finance Act 2019, people involved in certain transactions were not required to pay tax on their actual profits. Instead the tax collected or deducted on such transactions was treated as their final tax liability. Since the tax deducted on such transactions was treated as their final tax, such people were not subject to detailed scrutiny through audit.

Prior to the Finance Act 2019, the final tax regime was available for commercial importers, commercial suppliers of goods, contractors and people deriving brokerage or commission income and revenue from compressed natural gas stations. In order to tap the actual tax potential, amendments were made through the Finance Act 2019 whereby the tax collected or deducted from such transactions were made minimum tax except for exporters, people winning prizes and sellers of petroleum products.

Sources said the government would continue the policy of phasing out the final tax regime under its budget strategy during next three years. The sources said the government would increase the share of direct taxes in revenues by phasing out final tax regime. Documentation of the economy to increase taxation in wholesale and retail, real estate and speculation businesses is also a government’s priority.

Under the medium-term budget strategy for next three years, the government would not offer any amnesty scheme. Tax exemptions would further be curtailed, according to the sources. The government also planned to rationalise income tax slabs and lower thresholds to broaden the tax base. During the next three years, simplification of laws and regulations and improvement in tax administration, through amendments in tax law, would ensure risk-based audit system.

The sources said the Federal Board of Revenue (FBR) is effectively using information technology support for efficient detection, monitoring and facilitation of the tax regime. Data on foreign bank accounts of Pakistani citizens are analysed to detect tax evasion. IT-based databank regarding foreign bank accounts would also be established. Tracking and tracing system for collection of federal excises duty on cigarettes has commenced with the issuance of licences. Electronic monitoring of production and sales of various sectors would also commence in due course of time. In 2020/21, the FBR would work to remove structural anomalies in the taxation regime, such as anomalies from statutory regulatory orders (SROs)/aligning certain SROs with the main statute and rules. Tax returns forms would be simplified.