Latest news with #Rs14.307
Express Tribune
17-05-2025
- Business
- Express Tribune
Crushing tax target
Listen to article The IMF's latest tax policy suggestions for Islamabad in relation to the upcoming annual budget may cause further consternation, as salaried individuals can expect an even greater share of the tax burden to be placed on their shoulders. At the core of the recent discussions between the government and the IMF has been the anticipated Rs14.307 trillion tax target, where the Washington-based lender is emphasising additional revenue measures and a rebalancing of fiscal resources. The Fund has also pushed back against the government's desire to reduce the tax burden on the salaried class, effectively accusing the government of fudging the numbers to push through a reduction after statistics showed an astounding increase of over 50% in income tax recovered from salaried individuals this year. Despite this, the IMF is averse to even raising the exempted income level, let alone revising tax slabs. At the same time, the government could do better than rely on the much-criticised Laffer Curve model to justify its tax policy. On that note, the competence of tax policymakers, up to and including members of the federal cabinet, can be gauged by the price of packaged milk. Most countries exempt milk entirely or charge a lowered rate, usually without any variance based on packaged or raw milk. In our malnutrition-riddled country, packaged milk has an 18% tax rate, while raw milk is tax-free. Many FBR officials reportedly see nothing wrong with this situation. Meanwhile, poor urban dwellers must find a local cow if they want to get milk at an affordable price. More common ground could be found, however, on privatisation-related issues. While sales of state assets are only one-time income, ridding the exchequer of bleeding assets brings long-term savings that help balance the budget. The government could use these savings as justification for reducing some of the income tax burden or increasing some public spending, especially since there is likely to be a bump in the defence budget due to the simmering threat of conflict with India.
Express Tribune
16-05-2025
- Business
- Express Tribune
IMF narrows focus on new tax measures
The International Monetary Fund has narrowed down its focus in the new budget to mainly on additional tax measures and rebalancing the National Finance Commission award, as the government badly struggles finding any space to provide relief to the salaried class and the real estate sector. The salaried class has been hit the hardest which, according to the fresh details, paid an all-time record high Rs437 billion in income taxes in just 10 months of this fiscal year. The amount is higher by Rs150 billion compared to last year. The IMF on Thursday urged the Pakistani authorities to listen to its experts instead of relying on the arguments about ground realities or the Laffer Curve tax theory, the sources said. The Pakistani authorities mentioned low revenues due to high tax rates, which the IMF did not appreciate, they added. During a separate session, the IMF also raised questions on the working of the Federal Board of Revenue to cut taxes for the salaried class, said the government sources. They added the IMF was of the view that the proposed reduction in rates for the salaried class may result in far higher relief than claimed by the government. The FBR was now in the process of redoing the salaried class taxation slabs. The sources said that during the kick-off meeting with Finance Minister Muhammad Aurangzeb on Thursday for the budget approval, the IMF's outgoing mission Chief Nathan Porter narrowed down his mission's focus to four areas. The topmost priority of the IMF would be the revenue measures to back the Rs14.307 trillion tax target and rebalancing the distribution of fiscal resources under the NFC without affecting the constitutional scheme. The sources said that the other two areas of interest during the talks will be any savings from the downsizing of the government and the privatisation agenda in the next fiscal year. ] The provinces get 57.5% shares in the federal taxes and the government was trying to hold back some of the sums without amending the Constitution. During a meeting last week, a cabinet minister had recommended getting 50% of the additional defense spending from the provinces due to increasing requirements after India's naked hostilities against Pakistan. The IMF team virtually began discussions on the new budget from Turkey on Wednesday. The team plans to travel to Islamabad next week for the last round of talks ending on May 23rd. The sources said that during the kick-off meeting, the Pakistani authorities raised the issue of higher tax rates leading to low collection in certain areas. However, the IMF outgoing mission chief advised to listen to his experts. The IMF team seemed not impressed by the Laffer Curve economic theory. During a taxation related meeting with the FBR, the authorities shared the proposal of reducing taxes for the salaried class. The sources said that the government proposed increasing the income tax exemption threshold from Rs600,000 to Rs1.2 million per annum. It also proposed setting new slab rates of 10%, 25%, 33% and 35% while upwardly adjusting the income levels where these slabs will become effective. However, the IMF's view was that this would significantly dent the revenues. According to the fresh details, the salaried persons paid a whooping record Rs437 billion during July-April period of this fiscal year, which was Rs150 billion more than the last fiscal year. With two months remaining, the additional contribution would increase to around Rs190 billion compared to Rs75 billion that the government had claimed in June last year. The merit warrants that the salaried class burden should be lowered by at least Rs100 billion, as anything lower than would not end the discrimination with the class. The sources said that the government did not have enough fiscal space to give meaningful relief to the real estate sector. The initial proposal is to reduce the withholding taxes on the sale and purchase of the properties by only 0.5% each. The FBR wanted that after lowering the taxes, these should be treated as final liability but the Finance Minister asked to keep these adjustable. There was also a proposal to introduce a new slab of capital gains tax for the higher earnings from the property, said the sources. This week the discussions also took place within the government to reduce the sales tax on packaged milk. Some members of the FBR proposed to reduce the rate from 18% to either 15% or 17%. However, no decision was taken with one senior official suggesting to keep the rate unchanged. The 18% sales tax on packaged milk is the highest in the world despite higher malnutrition in Pakistan. While making a decision on reducing tax on milk, the FBR officials did not have a clear idea about the price of the packaged milk in the market. The tax authorities had also proposed to slap federal excise duty on biscuits but there was no agreement on that within the government. The proposal of slapping a new tax on biscuits and discussing at the level of the finance minister shows the insensitivity of the government. The sources said that the government was also considering two options with regards to the withdrawal of tax-free status of the erstwhile federally administered tribal areas. One proposal was to introduce the standard 18% rate while the second proposal was to introduce a 10% rate, said the sources. However, the final decision will be taken by the senior leadership of the PML-N, said the sources.
Express Tribune
03-05-2025
- Business
- Express Tribune
Govt may set Rs14.3tr tax target for next fiscal
Listen to article The government may set a new tax target at over Rs14.3 trillion, which is higher by Rs2 trillion over this fiscal year's downward revised goal and may require at least Rs500 billion in additional measures to achieve it. After working out the new tax target figure for the fiscal year 2025-26, the government has begun the exercise to shortlist measures that it would need to show that the Rs14.307 trillion goal is realistic and achievable. Finance Minister Muhammad Aurangzeb is expected to deliver his second budget speech either on June 2 or June 3 before Eid holidays. The Rs14.307 trillion target is equal to 11% of the next fiscal year's projected size of the economy. A senior official of the FBR told The Express Tribune that the absolute tax target number may change, depending upon the size of the economy but the 11% of the GDP figure would be the target. The development came as the deadline to inform the businesses about accepting or rejecting their budget proposals has lapsed. The government had invited proposals from various chambers and business associations in January with a promise to respond to them by the end of April about how many of those can be realistically accepted. When contacted, Finance Minister Muhammad Aurangzeb said that the review of the budget proposals was underway as these proposals are still coming in. The Rs14.307 trillion for fiscal year 2025-26, starting from July, is tentative and subject to the endorsement by the International Monetary Fund that is visiting Pakistan from May 14th to vet the budget. The Rs14.3 trillion target is 16% or Rs2 trillion more than this year's Rs12.3 trillion downward target, the government sources said. It is also higher than the figure that the FBR pitched to the Finance Minister, which was significantly less than the target that the government wants to set for the tax machinery. For this fiscal year, the government had set the original tax target of nearly Rs13 trillion or 10.6% of the GDP. Due to lower inflation and lower economic growth, the target has downward been revised to Rs12.3 trillion but it remains constant at 10.6% of the GDP. The sources said that the authorities will have to take about Rs500 billion worth new tax measures to make the next target realistic and to end any uncertainty associated with it. These measures would come over and above Rs1.3 trillion additional taxes, which were imposed on the people, mostly on the salaried class, to achieve this year's target. Despite putting an extraordinary burden on the people, the FBR has so far faced the tax shortfall of Rs830 billion, underscoring that the economy's ability to pay more has eroded without broadening the base. What is equal to a mini-budget, the government has already increased the petroleum levy rate by Rs18 to Rs78 per liter under different pretext to offset the impact of FBR shortfall. FBR Chairman Rashid Langrial said on Wednesday that next year's budget would be tough in terms of achieving tax targets, forewarning the people about the upcoming taxation measures. OICCI budget proposals Meanwhile, Finance Minister Muhammad Aurangzeb held a meeting with the Overseas Investors Chamber of Commerce and Industry (OICCI) to discuss its budget proposals. The OICCI was not informed whether any of its proposals would be accepted. The association has suggested the government to withdraw Rs5,000 currency notes to discourage cash economy. The size of the informal economy is estimated at least 40% of the formal economy but the government does not seem serious about cracking down on the informal economy. The OICCI also recommended exempting the chemical dealers from 2% withholding tax that is charged from the distributors on supplies to traders. In an important proposal, the association has also demanded to abolish 10% surcharge on individuals earning Rs10 million or more on compliant taxpayers as it places an unjust burden on regular filers. Pakistan's highly marginalized salaried class paid Rs391 billion in taxes in just ten months. The salaried class paid 10% of the total income tax paid by the entire Pakistan compared to 0.6% paid by blue-eyed traders. The OICCI has recommended the government to exempt up to Rs100,000 monthly income from tax, which is justified demand given the fast eroding purchasing power of the people. It has suggested that in order to retain the number of filers, the government may impose Rs1,000 token tax for incomes above Rs600,000 to Rs1.2 million annual income. It has also demanded tax credit for deductible allowances for housing loans, education, and medical expenses. The OICCI has recommended limiting taxation of company contributions to Provident Fund to 10%, eliminating the Rs150,000 cap. It has also sought specific exemption of capital value tax of% on foreign assets for expatriate Pakistanis returning and foreign nationals becoming resident employees. In a major proposal, the OICCI has demanded reducing the corporate income tax rate gradually from 29% to 25% through an annual 1% reduction to align with other emerging economies. It has sought abolishing the super tax gradually over three years, in the first phase cutting from 10% to 6% from July. The OICCI has demanded abolishing 15% income tax on payment of dividends, which takes the rate to 64% for some companies. The OICCI has also demanded to reduce sales tax to 17%, which the government may not accept due to its major dent on the budget. The association has asked to declare petroleum products as taxable supplies allowing input tax adjustments but the FBR showed reluctance due to the IMF programme. It also rightly demanded reducing tax on packaged milk to 5% from 18% to encourage growth in the dairy sector, enhancing nutrition and affordability for the general public. In another major proposal, the OICCI has asked to restore zero rating of sales tax on local supplies under Export Facilitation Schemes (EFS) by withdrawing 18% GST. The IMF is not in favour of withdrawing this tax. The OICCI has asked to reduce federal excise duty on aerated waters to 18% and juices to 15%, which has adversely affected the growth of these companies.
