Latest news with #Rs437
Express Tribune
31-05-2025
- Business
- Express Tribune
Tax shortfall exceeds Rs1 trillion
The salaried class was the most affected segment that paid a record Rs437 billion in taxes till April, which were 52%, or Rs150 billion, more than last year. photo: FILE Listen to article The shortfall in tax collection widened to an alarmingly high level of Rs1.03 trillion in just 11 months of the current fiscal year despite imposing record new taxes in the budget, taking advances, withdrawing money from people's bank accounts and blocking refunds of companies and individuals. Only in May, the Federal Board of Revenue (FBR) faced a mammoth shortfall of Rs205 billion despite paying 5.3% less refunds compared to last year. The embarrassing outcome brings into question the government's strategy of collecting taxes from the already burdened classes and sectors of the economy. One of the reasons for missing the monthly target by a wide margin is no new recovery of arrears in litigation cases, which both the government and the FBR had promised to recover through expeditious settlement of the cases. The FBR provisionally collected Rs10.21 trillion from July through May of the current fiscal year, falling short of the target by Rs1.03 trillion, according to its statistics. The collection was still around 28%, or Rs2.2 trillion, higher than the previous fiscal year, but not enough to stay on track. The key reasons behind the higher collection compared to last year were the imposition of more taxes in budget, particularly on the salaried class and corporate sector, and expansion of sales tax net to many untaxed areas. Yet the FBR missed the target by Rs1.03 trillion. The FBR did not respond to a request for comment till the filing of the story. The shortfall is far more than what the government committed in talks with the International Monetary Fund (IMF) in March this year, when the lender lowered the target by Rs640 billion for the full fiscal year. In a meeting of the National Assembly Standing Committee on Finance on Thursday, PPP MNA Mirza Ikhtiar Baig said that the FBR illegally recovered money from multiple bank accounts in Karachi to meet its targets. Moreover, Utopia Industry, one of the top 12 exporters, is struggling to get Rs3 billion in refunds, a situation many industries are facing despite official claims of clearing refunds within 72 hours. Details showed that in May the FBR paid Rs2 billion, or 5.3%, less refunds compared to the same month of last year. Total refund payments in 11 months reached hardly Rs458 billion, higher by just 1.1% and not in commensuration with the 28% rise in tax collection. The salaried class was the most affected segment that paid a record Rs437 billion in taxes till April, which were 52%, or Rs150 billion, more than last year. For May, the FBR's tax target was Rs1.1 trillion. However, despite taking advances and slowing refunds, it could collect Rs907 billion. The monthly collection was Rs271 billion, or 43%, more than last year, which a senior FBR official said was commendable in the current circumstances. The IMF forced the country to impose new taxes, primarily burdening the salaried class and levying taxes on nearly all consumable goods, including medical tests, stationery, vegetables and children's milk. For the July-May period, the FBR missed its targets for sales tax, federal excise duty (FED) and customs duty but again exceeded the income tax target on the back of overburdening the salaried class. Income tax collection amounted to Rs4.9 trillion during the first 11 months of the current fiscal year, higher by Rs296 billion from the target. It was also Rs1.1 trillion more than last year. The burden was shared by the salaried class and the corporate sector as retailers and landlords remained under-taxed. Sales tax collection stood at Rs3.5 trillion, a whopping Rs900 billion less than the target of Rs4.4 trillion. Sales tax remained the most difficult area for the FBR and one of the reasons for the low collection was less-than-estimated growth in large industries. The government had immensely increased the sales tax burden in the budget. The collection was Rs755 billion higher than last year. The FBR collected Rs672 billion in FED, which was Rs166 billion less than the target. However, it was Rs180 billion higher than last year. The government did not spare homes, lubricants, fruit juices, cement, sugar, etc from FED in the last budget. Yet it failed to meet the target. Customs duty collection stood at Rs1.16 trillion, below target by Rs265 billion. The collection was hit by lower-than-projected import volumes. It was also marred by the manipulation of goods declaration forms by importers in connivance with the corrupt elements. The amount was Rs172 billion higher than last year.
Express Tribune
24-05-2025
- Business
- Express Tribune
After Tajir Dost flop, 1% levy proposed
Listen to article After the spectacular failure of the Tajir Dost scheme, which fetched a meagre Rs3 million against Rs437 billion paid by the salaried class so far, a tax advisory firm has recommended imposing a 1% income tax on all traders to ensure decent revenue collection. Tola Associates has also proposed limiting cash transactions to only Rs10,000 to discourage the informal economy, which has enabled traders to remain largely outside the tax net. These proposals were submitted this week to Deputy Prime Minister Ishaq Dar and Finance Minister Muhammad Aurangzeb. The firm also recommended that the government avoid further currency devaluation in the next fiscal year, challenging official projections that estimate the rupee falling to Rs290 to a dollar by June next year. The advisory firm has proposed that the government abolish the Tajir Dost scheme. Launched in June last year with the aim of collecting at least Rs50 billion, the International Monetary Fund (IMF)'s staff-level report disclosed this month that the scheme generated only Rs4 million. In contrast, the salaried class paid Rs437 billion in taxes during the first 10 months of this fiscal year, Rs150 billion higher than the same period last year. The firm recommended a 1% minimum income tax on all retailers, in addition to taxes already collected from wholesalers and retailers. It proposed that the tax be collected based on revenues generated under withholding tax clauses 236G and 236H. However, it is unlikely that the government will accept this recommendation. To enhance transparency and curb tax evasion, Tola Associates urged the government to ban cash transactions beyond Rs5,000 to Rs10,000 at retail and food outlets, mandating electronic payments. However, the Federal Board of Revenue (FBR) lacks the enforcement capacity to ensure compliance or to prevent businesses from discouraging digital payments. In a key recommendation, the firm stated that the upcoming budget should discourage currency devaluation by reducing non-essential imports, boosting local manufacturing and energy independence, promoting domestic value addition, and generating employment. It noted that economic stability requires a stable currency, targeted inflation, and no further devaluation. "Based on our estimates for FY26, if the current account deficit stands at 0.5% of GDP, the exchange rate should ideally stabilise around Rs276," said the report presented to the finance minister. However, the report noted that with the average exchange rate hovering around Rs280 this year, a potential depreciation of Rs10 to Rs15 could occur in FY26, bringing the rate to Rs290295 per dollar. Such devaluation could push inflation up by an estimated 3%, it warned. The government has already finalised the next budget based on an exchange rate of Rs290 per dollar. The firm also advocated export-led growth by implementing policies such as rationalising interest rates for industries, maintaining a balanced tariff policy on raw materials, and developing export-oriented industrial clusters. It added that promoting import substitution and offering result-based subsidies in key sectors like textiles, pharmaceuticals, and engineering goods is crucial for long-term sustainability. According to the firm, the 2025-2026 budget presents a critical opportunity for course correction and to reset the direction of the economy. It pointed out that the current policy rate of 11% remains a major barrier to industrial borrowing and investment. It urged the government to further reduce the real interest rate to the lower single digits to stimulate industrial expansion, particularly for capital-intensive manufacturing. To revive idle capacity and encourage new investment, the government should introduce a zero-markup loan scheme for priority manufacturing sectors. These concessional loans would reduce financial barriers and support import substitution, job creation, and export competitiveness. Tola Associates also expressed doubt over the FBR's ability to meet the next fiscal year's tax collection target of Rs14.1 trillion. The firm estimated that tax collection might reach Rs13.5 trillionfalling short of the IMF's target. It added that based on current trends, the FBR is likely to collect Rs11.9 trillion this fiscal yearRs1 trillion short of its original target. However, if the outcome of the super tax cases is in the government's favour, the FBR could potentially achieve Rs12.1 trillion. The firm reiterated its recommendation to impose an advance tax on undistributed reserves of companies that have not issued dividends for the past three years. It proposed a tax rate of 7.5% for unlisted and 5% for listed companies. This tax could be adjusted against future dividend taxes. It has also proposed changing the definition of resident Pakistani for the taxation purposes. "Pakistan is recommended to modernize its residency criteria to reflect actual economic presence and intent". Under its suggested framework, an individual would be considered a resident if they spend 182 days or more in Pakistan in a financial year. Those staying between 120 and 181 days would be assessed based on citizenship and income. For instance, a Pakistani citizen under the Pakistan Citizenship Act, 1951, or someone holding a Pakistan Origin Card (POC) with income above a certain threshold and no tax liability elsewhere, should be treated as a Resident but Not Ordinarily Resident (RNOR). Individuals not meeting these conditions and spending less than 120 days in Pakistan should be classified as Non-Residents, regardless of income or nationality, the firm added.
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
06-04-2025
- General
- Express Tribune
Rs437m grant approved for SOS villages
Sindh CM Murad Ali Shah, in recognition of the enduring collaboration between the govt and SOS Children's Villages, has announced the provision of land in Karachi, Khairpur, and Jamshoro, along with a financial commitment of Rs437 million for the development of educational infrastructure. During a special ceremony held at the CM House on Saturday to celebrate four decades of service provided by SOS Children's Villages in Sindh, Shah reiterated the provincial government's steadfast support for the organisation's mission. In his message, Shah praised the global leadership of SOS International, headquartered in Austria, for successfully expanding the model to 132 countries over the past 75 years. Special recognition was given to Souriya Anwar, the visionary founder of SOS Children's Villages in Pakistan, who laid the foundation of the movement in 1975. The CM congratulated SOS Children's Villages for completing 40 years of impactful service, starting with establishing the first SOS Village in Karachi in 1985. Highlighting the organisation's achievements, Shah remarked on the establishment of the SOS Technical Training Institute in Landhi, which trains over 1,200 youth annually in 12 vocational disciplines.
