Latest news with #FederalExciseDuty
Business Recorder
2 days ago
- Business
- Business Recorder
FBR to recover FED dues from PIA post sell-off
ISLAMABAD: The Federal Board of Revenue (FBR) will recover outstanding amount of Federal Excise Duty (FED) from Pakistan International Airlines (PIA) after its privatization. Federal Board of Revenue (FBR) Member Inland Revenue (Operations) Dr. Hamid Ateeq Sarwar was responding to an audit objection of Auditor General of Pakistan (AGP). The issue came to the light during the last meeting of the Public Accounts Committee held on FBR Audit Paras pending for the last 10-15 years. SRO 706 (I)/2010 tractor tax refund: FBR to seek Law Division's opinion AGP officials were of the view that the recovery of the FED is necessary as it was collected from consumers. The general public has paid this amount of the FED which was not a government grant issued to the national flag carrier. FBR Member Inland Revenue (Operations) said that if we do FED recovery from PIA at this stage, it would result in closure of the operations of the airline. Therefore, the FED should be recovered after privatization of the PIA. The status and the process of the privatization of the PIA could be updated by the Privatization Commission, FBR member added. There is an amount of nearly Rs 920 million outstanding against the said airline, according to the AGP officials. Copyright Business Recorder, 2025
Express Tribune
3 days ago
- Business
- Express Tribune
FBR's lapses cost govt Rs397b, PAC panel told
Policymakers are expected to continue improvements on tax collection side to widen the tax net by signalling reduction in corporate and salary tax by 1% per year for the next 10 years and by reducing industrial energy tariffs. photo: file A subcommittee of the Public Accounts Committee (PAC) was left stunned on Friday after uncovering gross mismanagement within the Federal Board of Revenue (FBR), which resulted in a staggering Rs397 billion loss to the national exchequer. The meeting of the subcommittee, chaired by its convener Shahida Akhtar Ali, was informed that the losses stemmed from the non-recovery of direct and indirect taxes as well as customs duties, due to negligence and inefficiency within the FBR. The subcommittee reviewed audit reports of the FBR for fiscal years 2010, 2011, 2013, and 2014. Audit officials disclosed alarming lapses, pointing out that Rs6.5 billion worth of sales tax and Federal Excise Duty (FED) had remained uncollected. They revealed that 633 individuals had either underpaid or evaded taxes, yet officials at 10 FBR offices failed to take action against them. Moreover, despite the presence of legal provisions allowing for forced recovery without show-cause notices, these measures were not implemented. It was further disclosed that the Pakistan International Airlines (PIA) had collected FED on tickets but failed to transfer Rs2.5 billion to the FBR. Officials added that, since PIA's privatisation remains incomplete, the government would now bear this liability. The committee directed authorities to verify the recoverable amount. The meeting was informed that 514 FBR agents did not deduct withholding tax during 2013-14, resulting in a shortfall of Rs24.15 billion. Additionally, the subcommittee was apprised that Rs71 million was assessed but never recovered. An FBR member informed the subcommittee that Rs16 billion had been retrieved and verified, while Rs452 million remained under audit scrutiny.
Business Recorder
26-06-2025
- Business
- Business Recorder
WHO warns unchanged FED on cigarettes may boost consumption
ISLAMABAD: World Health Organization (WHO) has expressed serious concern that the Federal Cabinet decision to keep Federal Excise Duty (FED) rates on cigarettes unchanged in budget (2025-26) would increase cigarette consumption in Pakistan. According to a report of the WHO on post-budget analysis and review issued on Wednesday, since February 2023, the Federal Excise Duty (FED) rates on cigarettes have remained unchanged. The Cabinet has maintained these rates in the proposed budget for FY 2025–26. With inflation rising by 26% over this period, the real value of FED rates and cigarette prices has declined, and this trend is expected to continue in the absence of any adjustment. For FY 2024–25, WHO has estimated cigarette production at approximately 37 billion sticks, an increase compared to the previous fiscal year—and projected FED revenue at Rs. 208 billion. Given the decision to keep FED rates unchanged for FY 2025–26, nominal cigarette prices are likely to remain flat, implying a further decline in real prices. This will likely result in increased cigarette consumption. Based on a simple simulation model, cigarette production (and consumption) is projected to reach around 38 billion sticks, generating Rs 217.6 billion in FED revenue in FY 2025–26. Alternatively, a policy intervention involving a Rs 39 per pack increase in FED could reduce cigarette consumption by an estimated 10.7%, bringing production down to around 34 billion sticks. This policy would also boost FED revenues by 20.9% compared to the current plan, resulting in higher fiscal and public health gains. Notably, the government has set a revised FED revenue target of only Rs. 147 billion from cigarettes in FY 2024–25—a surprisingly conservative figure, considering actual collections reached Rs 157 billion during the first nine months of the fiscal year. We estimate that total FED revenue for FY 2024–25 will reach approximately Rs. 208.2 billion, nearly Rs. 60 billion more than collected in the first three quarters. Estimated cigarette FED collection in FY 2024/25. Based on PBS's data, the average annual growth rate of cigarettes production from July 2024 to April 2025 is 12.4% higher when compared to July 2023/April 24. By assuming the same annual growth rate for the next two months, the estimated production of cigarettes for 2024-25 will be around 37 billion sticks. By applying the above market shares and FED and GST rates, it is important to note that the estimated FED revenue collection for 2024-25 is 208.2 billion Rs. This is much higher than 147.8 billion Rs of the government's revised target for 2024-25. The total indirect tax collection from cigarettes (FED+GST) in 2024-25 will be around Rs 275.7 billion. To protect both public health and government revenue, Pakistan's tobacco tax policy should be reassessed and strengthened. This includes regular adjustments to the Federal Excise Duty (FED) rates and stricter oversight of industry practices, such as production front loading ahead of the budget and manipulation of brand mixes. However, the current budget proposal for cigarette FED rates does not incorporate these tax policy corrections needed to meet revenue and health objectives. With this decision, the government and FBR hope to control cigarette illicit manufacturing and smuggling. To address those challenges, however, proper tax administration measures should be implemented, such as effective controls of the distribution movements of tobacco leaves, used cigarette machinery and other key cigarette inputs inside the national territory, WHO added. Copyright Business Recorder, 2025
Express Tribune
23-06-2025
- Business
- Express Tribune
Govt eases curbs on big-ticket purchases
Finance Minister Muhammad Aurangzeb on Monday formally unveiled a Rs36 billion mini budget in the National Assembly and announced to exclude almost the entire population from disclosing source of income before buying a big home, a car or running a bank account. The limits set for disclosing the source of income before making big purchases would now target only the users of above 1,600 cc cars, and people owning more than one-kanal residential houses in major cities and almost two-kanal houses in other cities. Effectively, this has rendered the enforcement initiative of the Federal Board of Revenue (FBR) chairman ineffective, which has also lowered the success rate to catch the tax evaders to just 3.7%. The FBR does not have the capacity to go after the people once they have made these purchases, thus, the government had planned to pre-empt the purchases. Aurangzeb made these announcements while winding up the budget debate in the National Assembly. With the winding up speech, the formal process for approval of the next fiscal year's budget and tax measures has begun that will end with the approval of the Finance Act likely on Thursday. The finance minister presented three more budget proposals before the National Assembly, which also target one-day old chicks, to generate a total Rs36 billion in additional taxes in the fiscal year 2025-26. He proposed increase in the tax rate on the income derived from the debt portion of mutual funds issued to companies from 25% to 29%. The minister said that the companies' other incomes were already taxed at the 29% rate. Aurangzeb said that the income tax rate on profits made by corporations and companies on investments in government debt is also increased from 15% to 20%. The government has also proposed tax on the poultry sector, where billions of rupees investments are made, said Aurangzeb. "It is proposed that a Federal Excise Duty (FED) of Rs10 per day-old chick should be imposed on hatchery chicks, so that this sector can also contribute to the national exchequer," he said. The government has estimated that about 1.5 billion chicks are produced every year and it will collect Rs15 billion by taxing a product that is a common diet of the poor and the rich. The minister said that these three additional measures will not impact the industry and the burden has been passed on to the wealthy people and institutions. The government proposed the Rs36 billion measures in lieu of reduction in proposed sales tax rate on import of solar panels from 18% to 10% and funding an increase in salaries of the government employees to 10%. Aurangzeb claimed that the government has presented a balanced budget for the fiscal year 2025-26. On the one hand, we have kept government expenditure under control, while on the other, much emphasis has been laid towards increasing the tax base and its compliance, said the finance minister. Exclusion Earlier, the government proposed that all those citizens should be barred from buying major assets, if their declared wealth does not support such purchases. But the finance minister announced the measure to drastically tame these powers. "On the instructions of the prime minister, this new law will not apply to the purchase of residential plots or houses worth up to Rs50 million, commercial plots or properties worth up to Rs100 million and vehicles worth up to Rs7 million," he said. These limits are "too generous" and compromise the objective of linking the purchases with white money, a senior FBR official told The Express Tribune. Early this year, the FBR chairman had informed the National Assembly Standing Committee on Finance that due to almost no capacity of the FBR to audit the tax statements, the rate of success in inquiring the people about the source after making these purchases was only 3.7%. The government has also agreed to relax the criteria for banning the economic transactions such as buying a home, plot, car, investing in securities and maintaining a bank account by those, whose declared assets do not support these purchases. It had proposed to ban all such transactions if the declared assets do not support these purchases. The ineligibility condition will be applicable only if the cash in the bank account is more than Rs100 million per annum in all bank accounts of one individual. The ineligibility condition on stock market investment would be applicable, if the cumulative investment in a year is more than Rs50 million. One of the genuine concerns was that the FBR may end up exploiting the people in the absence of a credible online platform to determine the eligibility of the people to make these purchases. Because of this reason, the National Assembly Standing Committee on Finance had linked the implementation of these harsh conditions with the effectiveness of the online platform. The finance minister also announced to exempt a residential property owner from payment of up to 6.5% withholding tax at the time of sale, if the property is sold after retaining it for at least 15 years. He said that the government would not tax post-retirement benefits in the shape of commutation and gratuity. But the annual pension of over Rs10 million will be taxed at the rate of 5%. On the instructions of the prime minister, pensioners over the age of 75 are exempt from all types of taxes, he added. The government, in its bid to promote affordable housing, would launch a 20-year loan scheme for the low-income segment, informed Aurangzeb. He stated that individuals earning between Rs600,000 and Rs1.2 million annually will now be taxed at just 1% -- from 2.5% proposed in the budget. He added that the proposed 18% GST on solar panel imports has been lowered to 10% but said that it would increase the prices by only 4.6%. Aurangzeb informed the lower house that on the special instructions of the prime minister, the existing powers of the FBR regarding tax fraud and the amendments made through the Finance Bill were reviewed again, under which tax fraud has been categorised into cognisable and non-cognisable offences. "In cases involving up to Rs50 million, the FBR will not be able to arrest without a court warrant," he said. In addition, the person can be arrested only if he does not become a part of the inquiry despite three notices; the accused tries to escape; or tampers with the record. He said that the approval for arrest will be given by a high-level three-member committee of the FBR, instead of an officer, and it will be necessary to present the arrested persons before the court of a special judge within 24 hours," he said.
Business Recorder
23-06-2025
- Business
- Business Recorder
Aurangzeb unveils new tax measures, targets poultry, mutual funds & govt securities
Finance Minister Muhammad Aurangzeb unveiled new taxation measures, including levies on income generated from mutual funds and government securities, at the National Assembly on Monday. Addressing the lower house, the finance minister presented three more budget proposals. 'The first of these is to increase the tax rate on income derived from the debt portion of mutual funds issued to companies from 25% to 29%. Secondly, it is proposed to impose a 20% tax on profits made by corporations and companies on investments in government securities,' he said. The government has also proposed to tax the poultry sector, said Aurangzeb. 'It is proposed that a Federal Excise Duty (FED) of Rs10 per day-old chick should be imposed on hatchery chicks, so that this sector can also contribute to the national exchequer,' he said. The finance minister maintained that the government has presented a balanced budget for the fiscal year 2025-26. 'On one hand, we have kept government expenditure under control, while on the other, much emphasis has been laid towards increasing tax base and its compliance,' said Aurangzeb. Imported cotton yarn: APTMA hails 18pc sales tax imposition Aurangzeb said that tariff rationalisation is vital, stating: 'By lowering import duties, our business unit cost would decrease, which will facilitate exports.' He said that the government will soon announce an industrial policy, whereas consultation on EV policy has already been initiated. Moreover, the government, in collaboration with British Asian Trust, would soon launch Pakistan's first Skill Impact Bond (SIB). The SIB links funding to the achievement of outcomes, he said. Affordable Housing The government, in its bid to promote affordable housing, would launch a 20-year loan scheme for the low-income segment, informed Auranzgeb. He clarified: 'Only those dams will be pursued that are already approved.' On Saturday, Aurangzeb, in his address to the Senate, announced key relief measures in the federal budget for FY2025-26, including a significant income tax cut for the salaried class and a reduction in General Sales Tax (GST) on imported solar panels. The finance minister, on Monday, reiterated that individuals earning between Rs600,000 and Rs1.2 million annually will now be taxed at just 1%, down from 2.5% proposed in the budget for FY2025-26. He said that tax has been imposed on individuals receiving an annual pension of over Rs10 million, while, on the special instructions of the Prime Minister of Pakistan, pensioners over the age of 75 are exempt from all types of taxes. Aurangzeb added that the proposed 18% GST on solar panel imports has been lowered to 10%. Powers of FBR Aurangzeb informed the lower house that on the special instructions of the Prime Minister, the existing powers of the FBR regarding tax fraud and the amendments made through the Finance Bill were reviewed once again, under which tax fraud has been categorised into cognizable and non-cognizable offences. 'In cases involving up to Rs50 million, the FBR will not be able to arrest without a court warrant,' he said. In addition, any one of the following conditions must be fulfilled for arrest: 1) the accused deliberately did not become a part of the inquiry despite three notices; 2) the accused tries to escape; and 3) tampers with the record. 'Despite this, the approval for arrest will be given by a high-level three-member committee of the FBR, instead of an officer, and it will be necessary to present the arrested persons before the court of a special judge within 24 hours,' he said. In addition, it will be ensured that no citizen is abused in this process, he added. Real estate sector In the real estate sector, Aurangzeb noted that in the past, people used to buy large properties beyond their declared financial means. Under Section 114C of the Income Tax Ordinance, the Finance Bill proposed to prohibit such people from engaging in large financial activities. 'On the instructions of the prime minister, this new law will not apply to the purchase of residential plots or houses worth up to Rs50 million, commercial plots or properties worth up to Rs100 million and vehicles worth up to Rs7 million,' said the finance minister. Aurangzeb said that the ongoing tensions between Iran Israel are expected to disturb the region's economic situation. However, the government is prepared to deal with any situation, he assured the lower house.
