Rollback of last govt’s tax breaks under study


ISLAMABAD: The PTI-led coalition government looks set to reverse the tax concessions of the previous government which were designed to benefit high-earning individuals substantially more than the middle-class workforce.

The government is also considering an amnesty scheme for over a million people who are being selected for income tax audit over the years, but the Federal Board of Revenue is facing problems to clear this huge pendency.

Besides, a series of measures are being proposed that seek to impose quantitative restrictions, increase rates of regulatory duties and, in some cases, restrict imports of certain commodities to control the rising import bill of the country.

Exemption threshold to be revised downward to Rs800,000 from Rs1.2m; PSDP to be cut to Rs700bn from Rs1,030bn


The previous PML-N government had given sweeping tax cuts to low salary earners, raising the exemption threshold almost three times to Rs1.2 million from Rs400,000. As a result, estimated 700,000 taxpayers fell out of the tax net. The total return filers in the tax year 2017 were 1.4 million.

Also Read: Scrapping of lowest tax slab to hurt cigarette sales, warns PTC

Instead of enjoying zero tax, a nominal tax of Rs1,000 for individuals in income brackets ranging from Rs400,001 to Rs800,000 and Rs2,000 for individuals in income brackets ranging from Rs800,001 to Rs1.2m was proposed in the budget.

“We have decided to rationalise the exemption threshold,” a senior tax official told Dawn. He said the exemption limit would be revised downward to Rs800,000 for individuals, claiming that there would be no major impact in take-home salaries of individuals. “We will not take back maximum relief from low income earners,” he said.

For higher income earners, the previous government had scaled down the maximum slab to 15 per cent from 35pc in one go. “This rate will be revised on higher income bracket upward to minimise the taxes impact,” the official said without specifying how much.

According to him, all these proposals regarding slab-wise taxes rates and exemptions threshold are under consideration and a final decision will be taken by the cabinet.

This drastic reduction in tax liability perpetuates the regressive character of the taxation regime in Pakistan and is against the global tax system. The reforms were not just reducing tax slabs, but surrendering Rs100 billion in taxes to high earners in the country.

The proposed amendments also include an upward revision in withholding tax rates for non-filers. The purpose is to increase the cost of non-compliance for such people.

Over the years, audits of one million people are pending with the FBR. For disposal of the audit cases, it has been proposed to offer a one-time amnesty scheme to those who are being selected for tax audit by paying 25pc extra tax over and above the taxes already paid. Those who pay the extra tax will be cleared from the audit.

The FBR is also considering revising rates on cigarettes. “This proposal is under consideration to enhance upward the rate in the third tier,” the official said, adding that the previous government had given more than 50pc relief in third tier, causing a huge revenue loss.

One of the aims of the proposed amendments is to bring down the overall import bill. Several proposals are on the table in this regard, the official said.

On the customs sides, it has been proposed to enhance further regulatory duties on 1,500 tariff lines. Last year, the import of 700 lines dropped owing to regulatory duties.

Also Read:  What is being discussed in the new Camelot occupied by PTI?

The commerce ministry and customs are working on a list of items which will be subject to quantitative restrictions and restrictions on their imports. These items will include mostly luxury and other consumption items to discourage “non-essential” imports.

On the development side, the government is also considering making a drastic cut in the Public Sector Development Programme to Rs650bn-Rs700bn from budgeted approved target of Rs1,030bn. The move is part of bringing down the budget deficit which reached 6.6pc of GDP during the fiscal year 2017-18.

(This news/article originally appeared in DAWN on September 13th, 2018)

Facebook Comments