ISLAMABAD: With claims to reduce and simplify procedures for tax payments, the PTI-led government has decided to slap additional taxes for upper model imported vehicles, differentiate and increase duty on cellular IPhone and jacking up rates for cigarettes while hundreds of items will be moved towards higher slabs of duty for the purpose of achieving import compression.
“The preparation of presenting mini budget has got momentum as the government has asked the ministries concerned including the Ministry of Commerce and FBR to come up with plans for identification of imported items that can be moved from one slab to another slab without bringing any change in overall rates of existing structure of four slabs. The plan for moving towards import compression is on cards,” top officials of Finance Division confirmed to The News here on Monday.
Federal Minister for Finance Asad Umar along with dwellers of Q Block (Ministry of Finance) officials held deliberations with the FBR on eve of last weekend in which the government finalised proposals for simplifying cumbersome procedures and reduce number of payment of taxes requirements in a bid to ensure ease of doing business and luring potential investments.
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On major revenue spinners, the government decided to increase taxes/duties on import of luxury vehicles of 1600cc and above by jacking up rate in the range of 10 to 20 percent through the upcoming supplementary finance bill expected to be tabled before the Parliament within this ongoing month.
“We have also decided to differentiate duty structure on import of expansive phones as the rate of taxes for import of IPhone is proposed to be increased through fresh money bill,” the top official said who is working on budgetary tax proposals for remaining period of the current fiscal year 2018-19. The third tier system for tobacco will continue while rate of taxes for cigarettes will be increased to bring it align with WHO recommendations.
The FBR has been facing major revenue shortfall in the range of Rs160 to Rs170 billion in first six months and without additional tax measures the possibility of achieving envisaged target of Rs4398 billion seems simply impossible. However, the IMF has projected that with steep devaluation and rising inflationary pressures the FBR could fetch Rs4500 billion and with additional steps the collection could go close to Rs4700 billion. But the revenue collection is demonstrating dismal performance of the tax collection machinery and the FBR will have to opt new ways and means to achieve the desired results.
The official said the major exercise would be undertaken for identifying items for achieving compression of imports. Without changing existing slabs at rate of 3 percent, 10 percent, 15 and 20 percent, the government plans to undertake an exercise to bring hundreds of items from one slab to higher slab with the possibility to bring certain items from the slab of 10 to 15 percent through this exercise.
With additional custom duty that stood at rate of 2 percent at the moment, the effective rate of slabs has already come on higher side so the government dropped the idea to further increase the additional customs duty from existing rate of 2 percent to 3 percent across the board. “We will identify items that will be moved from possible rate of slab at 10 to 15 percent and from 15 to 20 percent,” said the official. With the slab of 3 percent, mostly raw material items are falling into this category so there is little room for adjustments into first slab because its movement will cause increased cost of doing business for exportable items,” said the official.
The Overseas International Chamber of Commerce and Industries (OICCI) also sent out budget proposals for mini budget and next fiscal budget 2019-2020 to the Minister of State for Revenues Hammad Azhar and demanded of the government to simplify the complex system of determining the tax liability and immediate remedial measures are to abolish taxes like alternative corporate tax, minimum tax and delete Super tax from next year.
The recurring audit/examinations/reviews should be restricted to once in a year only. There should be a single collection Authority for collection of all type of taxes and duties. Online payment through direct bank transfer should be available. Recovery proceedings should not be started before decision of one independent Authority i.e. Appellate Tribunal, instead of the current practice where Tax Authorities start recovery proceedings after the lapse of thirty days from the date of order. The sales tax return should be simplified, as it currently includes a number of annexures, is not user friendly – especially for an SME – and requires significant time and cost for compliance. Furthermore the federal sales tax return, Annex B and C are not available in excel download form.
When contacted to official spokesman of Ministry of Finance Dr Khaqan Najeeb for seeking his comments, he said that the system and procedures will be reduced and simplified in order to attract investors through supplementary finance bill. “We will move eliminating anomalies in our tax structure,” he concluded.
(This news/article originally appeared in The News on January 8th, 2019)