After dropping Super Corona Tax proposal: FBR ponders various options to expand tax net

ISLAMABAD: After dropping proposal of corona tax for higher income brackets, the FBR is contemplating upon more options including raising tax incidence on cigarettes, expanding supply chain of GST in VAT mode starting from manufacturers, wholesalers to now big retailers, imposition of one time land tax on assets as well as providing relief to small and medium enterprises.

First of all the government plans to negotiate with the IMF to slash down the next fiscal year target from Rs5,103 billion to Rs4,800 to 5,000 billion. It is premature to ascertain exactly the next year target with authority as efforts will be made to convince the IMF for maximum reduction against so far desired target of Rs5,103 billion for next budget.

The FED on tobacco sector might be further jacked up but the formal sector is of the view that with abolishing of three tier system the overall collection might reduce from Rs124 billion in last fiscal year to Rs115 to Rs116 billion for the current fiscal year. The share of illicit cigarettes has gone up and the FBR also failed to place track and trace system after the decision of the higher judiciary.

The FBR high-ups had kick-started presenting budget proposals before Advisor to PM on Finance Dr Abdul Hafeez Shaikh and another important meeting was expected to be held today (Friday).

One important member of the economic team who is part of ongoing deliberations told this scribe that the government must consider only providing relief to those sectors that must extend help for kick-starting sluggish economic activities.

At this point of time any proposal for slapping additional taxes would further kill the economy. However, he suggested that the FBR could move ahead towards completing value chain for bringing GST in VAT mode from manufacturers to wholesalers and now bringing mega retailers into whole tax net.

The official said that the economy in post COVID-19 situation changed altogether so the parameters of pre virus could not be applied in arising out circumstances. The economy does not require routine solutions so the government will have to avoid normal prescriptions.

When contacted to top officials of FBR, they argued that they presented different proposals mainly for providing tax relief and incentives to organised corporate sector on raw material and intermediatory goods on tariff and small and medium enterprises on all tax fronts.

One time land tax is also under consideration but its exact details will be worked out in coming days. Things will only be finalised after discussions with the IMF, they added.

Dr Khaqan Najeeb, former advisor to the Ministry of Finance said that the government should aim for a tax free budget other than increases in sin taxes (alcohol, tobacco, sugary drinks etc), one time tax of sectors showing abnormal profits and a one time tax on land.

He said it would be fair to start thinking about distributive taxation like an inheritance kind of levy on large transfers with low rates to begin with. Dr Khaqan emphasised that a maximum push on monitoring, enforcement and compliance has to come from all the smart folks in FBR. He said this, along with nominal growth will help us get Rs600 billion above where we finish in FY-20. Dr Khaqan further said it is essential for us to implement a reform of making compliance simple, less document focused and digitised.