FBR weighs revenue growth proposals without new taxes, rates

KARACHI: The Federal Board of Revenue (FBR) is diligently weighing all the proposals that would lead to revenue growth next fiscal year without need of new taxes or increasing tax rates, including withdrawal of tax credit to pull in Rs5 billion, sources said on Tuesday.

The sources said the FBR is eyeing five billion rupees in the next fiscal year through abolishing of a tax credit. Withdrawal of tax credit for taxpayers falling in the final tax and minimum regime would generate revenue of Rs5 billion.

The FBR is considering all proposals where revenue could be enhanced without imposing new tax or enhancing tax rates during the next fiscal year as lockdown took heavy toll on business activities and led to sales trough, they said.

The International Monetary Fund envisaged FBR’s annual tax collection target with 31 percent increase from the revised target of Rs3.9 trillion in the outgoing fiscal year of 2019/20 to Rs5.1 trillion in 2020/21.

The sources said Large Taxpayers Unit (LTU) Karachi submitted proposals for budget 2020/21 and advised amendment into a section (65B, 65D and 65E) of Income Tax Ordinance, 2001 to withdraw tax credit for taxpayers falling in minimum tax and final taxation. The tax unit said allowing tax credits against minimum tax and final taxes payable under the ordinance is against the principal of fairness and final tax regime. The unit believed that the withdrawal of tax credit to such taxpayers would help the revenue body to get additional Rs5 billion during the next fiscal year.

The sources in the FBR said business activities remained at standstill during a two-month long lockdown and tax authorities are not expecting significant revenue collection during the current fiscal year. Considering massive deterioration in economic activities, the government is taking all steps to facilitate businesses.

Therefore, the government is unlikely to impose new tax. But, the budget would focus on policy measures for revenue collection growth, they added.

The sources said another proposal is under consideration to discourage huge amount of salaries to directors and executives in case a company is incurring losses due to the prevailing situation.

The tax unit advised changes to another section (21 of Income Tax Ordinance, 2001). Giving a rationale to the amendment, the LTU Karachi said the amendment would restrict huge salaries and perquisites to employees including directors of company or members of association of persons despite incurring huge losses.

The tax unit also proposed amendments to a section (114 of Income Tax Ordinance, 2001) in order to ensure full compliance of return filing by taxpayers.

The LTU Karachi said under the amendment if a taxpayer revised his return and later discrepancies found then the return would be treated as invalid. Further, the LTU Karachi proposed the sections related to assessment and audit should be invoked in case the return is found invalid.