Five more sectors to be taxed

ISLAMABAD: Finance Minister Miftah Ismail announced the inclusion of five more sectors including real estate brokers, builders, car dealers, restaurants and salons in the tax network.

“We are gradually getting millions of stores into the tax network,” the finance minister said in his tweets. “I have brought jewellers into the network, and rest assured that I will be bringing all these professionals into the network also in the next few months.”

Miftah Ismail said that he spoke to associations to bring small shop owners and jewellers into the tax net, and the decision was taken in consultation with them.

The PMLN leader made these remarks in response to a tweet wherein a user had called out the government for letting the retailers off the hook with a “small fixed tax” and going after salaried individuals instead to generate more revenue.

In response, Miftah said he had brought jewellers into the tax net and would bring professionals including designers, lawyers, and doctors into the tax net. “But nothing forced. With consultation,” Miftah said as he revealed the government’s approach to increasing the country's tax base.

In response to a tweet over letting small traders and retailers go with a fixed monthly tax, Miftah said that he could only "fight so many battles".

Meanwhile, Prime Minister Shehbaz Sharif took to Twitter to “explain the rationale behind the announcement he made about a super tax on “rich people”.

In a series of tweets, he said when the coalition government came to power, it had “two paths open to it”. One path was to go for elections and leave the economy broken; the other was to address the economic challenges first, adding that the government chose the second option.

“We opted to save Pakistan from economic quagmire even if it involved political risks. We put Pakistan first,” said PM Shehbaz, adding that the budget presented by the government “contains the plan for revival of the economy”.

“The hard decisions we have taken will enable the country to overcome the economic crisis. The government has tried its best to place the minimum burden on lower-income and salaried class,” said the premier.

PM Shehbaz said the government imposed the 10pc super tax “for the purpose of poverty alleviation”.

PM Shehbaz said that the government has imposed the 10% super tax “for the purpose of poverty alleviation”.

“We have asked our affluent segment of society to fulfil the national duty by sharing the burden, for it is the poor who have always borne the brunt and rendered sacrifices for the country,” said the premier.

PM Shehbaz concluded: “Macroeconomic stability is the first step. What the coalition government is aiming to achieve is economic self-sufficiency. This precisely is the spirit of the budget. Our national security is very closely tied to economic reliance".

The Personal Income Tax (PIT) reforms are part of the IMF structural benchmark under the $6 billion Extended Fund Facility (EFF) which was agreed upon by the previous PTI-led government in February 2022 on the occasion of the completion of the 6th review.

Now the incumbent government has agreed to reverse the relief of Rs47 billion for the salaried class and also slapped a Rs33 billion net addition; thus a total of Rs80 billion tax was imposed on the salaried class through the revised Finance Bill 2022-23. Although the government has not yet tabled the revised Finance Bill 2022-23, it is expected to be tabled in the National Assembly next week.

For salary earning of Rs100,000, the proposed tax rate stands at Rs1,250 per month against initially proposed rate of Rs100 per month on eve of FY2022-23 budget.

The income brackets for earning up to Rs200,000 per month, their tax rate has gone up by 96 per cent compared to what was presented initially in the budget for 2022-23.

The income earner of Rs250,000 per month, the proposed tax rate stands at Rs23,750 per month against Rs10,500 proposed earlier for FY2022-23 which is 70 per cent higher than the initial proposed rate.

The income earner of Rs300,000 per month, now the tax rate proposed at Rs26,250 per month against Rs19,500 per month proposed earlier which is 35 per cent higher than initially proposed rates on eve of FY2023 budget.

Former Economic Advisor to Ministry of Finance Dr Khaqan Najeeb, when contacted, said that the only thing needs to be reconsidered by the IMF should be the relief for salaried earning up to Rs200,000 per month. This is essential because these people are the middle-income earners in the urban class and they are most hurt in the wake of rising inflation. He said there is no other way to compensate these kinds of individuals. He said that when budget was presented, relief was given to the salaried class, but the reversal jacked up tax rates for the urban middle class. He said that the good Personal Income Tax reforms must aim at providing relief for urban middle class from the onslaught of inflationary pressures as well as slapping of higher rates for higher-income earners.

He said that there was need to seriously undertake good reforms for PIT because bulk of salary earners fall in the category of monthly earning up to Rs200,000.