Govt sets highly ambitious tax revenue target of Rs4.9tr

ISLAMABAD: The government on Friday envisaged a highly ambitious annual tax collection target of Rs4,963 billion in budget 2020/21, while presenting net relief of Rs49.5 billion through taxation measures, against the revised estimate of Rs3,908 billion for outgoing fiscal year.

The Federal Board of Revenue (FBR) requires 27 percent growth in taxes in next fiscal year for achieving its desired target of Rs4,963 billion amid lingering COVID-19 pandemic where the economic activities were almost halted.

The FBR high-ups believed that the tax machinery could fetch Rs200 to Rs300 billion through effective enforcements and broadening of narrowed tax base. Tax experts, however said the FBR has taken taxation measures of Rs150 billion to Rs200 billion in very folded manner.

In a press briefing, FBR’s Chairperson Nausheen Javaid told journalists that the FBR provided relief of Rs26.260 billion on three taxes, including general sales, income tax and federal excise duty and imposed taxes of Rs1.7 billion. Net relief related to Inland Revenue Service taxes stood at Rs24.5 billion. On customs, the net relief stood at Rs25 billion. “With restoration of economic activities and increased imports the FBR will be able to achieve its envisaged target,” Javaid said.

The scope of section 73 certain transduction not admissible is proposed to be widened to cover all registered persons supplying taxable goods.

The FBR enhanced threshold for becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from Rs 50 million to Rs100 million and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.

One of the major enforcement measures introduced by the government in the budget 2020/21 is empowering the FBR to have real-time access to information and databases to the board by various authorities such as NADRA, FIA, provincial excise and taxation departments. In case of non-compliance, the FBR will be empowered to impose penalty against these departments and individuals after six months, meaning after December 31, 2020. In order to comply with Financial Action Task Force (FATF) requirements, the FBR has proposed to get details of those who are providing donations to non- profit organisations so strengthening of compliance regime is proposed.

The FBR slapped 7.5 percent federal excise duty ad valorem in case of locally manufactured double cabin (4X4) pick-up vehicles and 25 percent in case of imported ones, increase FED on cigar, cheroots, and cigarillos and imported cigarettes from 65 percent to 100 percent of retail price, increase in rate of FED on filter rods from Re0.75 to Re1 per filter rod, levy of FED on e-liquids of electric cigarettes @ Rs10 per ml and levy of FED on caffeinated energy drinks at rate of 25 percent.

For major relief measures, the minimum threshold of supplies by retailers for obtaining CNICs of the buyers is proposed to be increased from Rs50,000 to 100,000. The FBR also proposed reduction into capital gains tax on real estate from possessing period of 8 years to 4 years and the rates were also reduced from 5 to 2.5 percent, from 10 to 5 percent and 12.5 to 7.5 percent.

The FBR also reduced general sales tax rate from 14 to 12 percent for tier-1 retailers who will connect with point of sale (POS) software. The FBR hopes that 20,000 retailers will be connected with POS software in next fiscal year.

The FBR abolished additional customs duty on 20,000 items of raw materials, reduced federal excise duty on cement from Rs2 per kg to Rs1.75 per kg, abolished nine withholding taxes including education related expenses remitted abroad, tax on local purchase of cooking oil or vegetable ghee, advance tax on function of marriage halls, advance tax on cable operators and electronic media, advance tax on dealers, commission agents and arthis, advance tax on insurance premium and advance tax on income on tobacco. The withholding tax on unprocessed tobacco will remain unchanged at Rs10 per kg. The FBR also reduced regulatory duty on 400 to 500 smuggled prone items and enhanced scope of concession available to special economic zones.