ISLAMABAD: In order to fetch an additional Rs466 billion for jacking up the FBR’s tax collection target of Rs7,470 billion, the government took some drastic measures by increasing the tax rate on high-income earners to fetch Rs120 billion for poverty alleviation and Rs35 billion through raising tax rates for salaried class.
The government slapped a 10 percent super tax on 13 high-earning sectors with a revenue impact of Rs80 billion for the next financial year 2022-23. The exchange rate depreciation will also help the FBR to collect more taxes at the import stage in the budget for 2022-23, so with help of all these taxation measures, the tax collection target will be increased up to Rs7,470 billion. The government revised tax rates for the salaried class in order to fetch a net additional amount of Rs35 billion into the national kitty.
On Personal Income Tax (PIT), the government raised a tax amount of Rs80 billion as first the government abolished tax relief of Rs47 billion and then raised a tax amount of Rs35 billion, so the FBR was going to collect Rs235 billion from salaried class in the next budget against a collection of Rs200 billion in the outgoing fiscal year. The PTI-led government had made a commitment with the IMF for raising the tax amount of Rs335 billion through an increased rate of slabs for the salaried class but the PDM-led coalition government convinced the IMF for collecting Rs100 billion less than agreed by the previous PTI-led government with the IMF.
For the salaried class, the government proposed a tax rate of 2.5 percent for income brackets of Rs50,000 to Rs100,000. For income earners from Rs100,000 to Rs300,000 on monthly basis, the proposed tax rate jacked up to 12.5 percent.
Where the taxable income exceeds Rs3,600,000 but does not exceed Rs6,000,000, the FBR proposed to jack up the tax rate from 17.5 percent to 20 percent. Where the taxable income exceeds Rs6,000,000 but does not exceed Rs12,000,000, the FBR tax rate is proposed to be increased from 22.5 percent to 25 percent.
Where the taxable income exceeds Rs12,000,000, the FBR will charge a tax amount of Rs2,004,000 plus 32.5 percent of the amount exceeding Rs12,000,000 on a per annum basis. For the above income, the FBR proposed a tax rate of 35 percent.
The Ministry of Finance high-ups disclosed to The News on Friday that all IMF’s demands on the fiscal front were almost fulfilled and now it was expected that the Fund staff would share a draft of the Memorandum of Financial and Economic Policies (MEFP) next week on Monday. The IMF and Ministry of Finance as well as the State Bank of Pakistan are holding parleys continuously. The Minister of Finance, Miftah Ismail, also chaired a meeting related to the government’s strategy for hiking power tariffs. The IMF has objected to the government’s estimates of allocating Rs225 billion for Price Differential Claims (PDCs) for the next budget as the IMF assessed that it might escalate to over Rs350 to Rs450 billion. The fuel price adjustment for May 2022 has been estimated at Rs8 per unit while it may go up further for June 2022. The increased prices of RLNG in the international market have increased woes of cash bleeding power sector as the price of furnace oil and coal also went up, thus, increasing generation cost manifold.
The Poverty Alleviation Tax, a one-time tax, which was levied at the rate of 2% of the income of over Rs300 million through the Finance Bill on June 10, 2022, has been proposed to amend as a one percent tax on the income between 150 million to 199.99 million, two percent tax on the income between 200 million to 249.99 million, three percent tax on the income between 250 million to 299.99 million and four percent tax on the income of 300 million and above. Earlier, the government estimated to generate Rs37 billion with these taxation measures but now it jacked up its estimates up to Rs120 billion. The net addition will be standing at Rs80 billion only. The government slapped a 10 percent super tax on 13 big industries including cement, sugar, steel, oil and gas, RLNG Terminal, textiles, banking, auto industry, tobacco, fertilizer, aviation, chemicals and beverages.
The government has proposed a tax on jewellery shops as on-premises of shops, it has been fixed at Rs40,000 per shop of jewellery. There is nearly 30,000 jewellery shops and only a few shops are registered. The Withholding Tax on the sale of gold by consumers was cut to one percent from 4 percent.
