Latest news with #Rs833
Express Tribune
11-06-2025
- Business
- Express Tribune
Anti-digital, pro-realty sector budget
Finance Minister Muhammad Aurangzeb on Tuesday unveiled a Rs17.6 trillion budget, which attempted to limit fiscal expansion but taxation measures were clearly self-contradictory that on one hand would promote cash economy and fossil fuels but discourage these too on the other. The government of Prime Minister Shehbaz Sharif also introduced new taxes on the digital economy, pensioners and clean energy. Some of these measures were contradictory to the stated policy to discourage the cash economy. However, the Finance Bill 2025-26, also gave incentives for clean energy by taxing the internal combustion engine cars and fossil fuels. Despite high poverty and high unemployment, the government proposed to drastically reduce import duties from raw materials to finished goods, which the industry feared would lead to de-industrialisation of Pakistan. The economy has been opened for the foreign competition by lowering protection available to local industries. The finance minister said that the maximum custom duty slab has been reduced to 15% while a five-year plan had been given to abolish additional and regulatory duties. The inaudible budget speech, which Aurangzeb, delivered in the midst of rowdy opposition, clearly lacked in giving any policy direction. While the Finance Division tried to meet the International Monetary Fund's (IMF) requirement to meet fiscal targets, the Federal Board of Revenue (FBR) was not able to come up with the clear taxation policy. The Finance Bill 2025-26 appeared to be the most confusing document that any government produced in years. It revolved around going after the economy of the youth and the 21st century business practices. The government has proposed 18% sales tax on import of solar panels but it imposed Rs2.5 per litre carbon levy on use of petrol, diesel and furnace oil, showing the lack of clarity on the part of the government. Likewise, it increased the tax on cash withdrawals from banks from 0.6% to 0.8% to discourage cash economy and generate more easy money but it also imposed a new tax on digital services platforms in the range of 0.25% to 5%. The government also increased sales tax on 850 cc cars of the middle class from 12.5% to 18%. A new tax has been introduced on pensioners where the monthly pension of Rs833,000 has been taxed at the rate of 5%. The FBR was once again lacking in determining the policy, whether the government wanted to promote digital economy or cash economy. FBR Chairman Rashid Langrial cancelled the media briefing on the Finance Bill 2025-26, which was tantamount to compromising transparency and the right of the people to know about the measures that impact their futures. In his budget speech, the finance minister surprisingly stated that the "rapid growth in the online business and digital market places was creating problems for traditional businesses, therefore, it is proposed that e-commerce platforms, couriers and logistic services should be taxed at the rate of 18%. A tax official told The Express Tribune that the FBR would earn Rs64 billion by taxing the digital economy. The Finance Bill 2025-26 showed that the economic managers preferred the 19th century economy by providing some relief on purchase of properties but taxed the digital platforms of the 21st century. It has also proposed to ban economic transactions of ineligible persons, which include ban on purchase of properties, cars and investment in securities by persons whose assets do not match these purchases. Through the Finance Bill, the government also amended a host of other non-tax laws besides introducing two new legislations, the Digital Presence Proceeds Act 2025 and the New Energy Vehicles Adoption Levy Act, 2025. There might be constitutional questions, whether the new laws can be introduced through the Finance Bill. The government has proposed a total of over Rs415 billion worth of tax measures in the budget, said the senior tax official. These include Rs292 billion worth of FBR-related measures, Rs111 billion additional earnings by imposing Rs2.5 per litre carbon levy on petrol, diesel and furnace oil and Rs9 billion worth levy on conventional cars. Finance Minister Aurangzeb said that the IMF had also accepted the Rs389 billion worth enforcement measures. But he admitted that the FBR's tax-to-GDP ratio would remain below the IMF target of 10.6% in this fiscal year. The government has proposed these measures to extract a minimum Rs2.2 trillion from the sluggish economy in a bid to achieve next fiscal year's Rs14.13 trillion tax target. The petroleum and carbon levy target has been set at Rs1.47 trillion for the next fiscal year on the back of Rs80 per litre levy. The finance minister also announced some respite for the lower to middle income group salaried persons. He said that on the annual income of Rs1.2 million, the tax rate will be 2.5%, down from 5%. In the cabinet meeting earlier, there was an exchange of words between the finance minister and the Communication Minister Abdul Alaeem Khan, who had asked the prime minister to further increase the salaries for the government employees. On that the finance minister stated that this would require additional resources, prompting Khan to say that he was not a street vendor, who did not know that this required additional money, said a member of the cabinet on condition of anonymity. The prime minister decided that in order to give a 10% increase in the salaries, the tax rate for the lower middle income group should be increased from the proposed 1% to 2.5%, said the sources. On annual income of up to Rs2.2 million, the government has proposed to reduce the rate from 15% to 11%, on annual income of Rs3.2 million, the rate is reduced from 25% to 23%. There is no relief for the annual salaried income earners of over Rs4.1 million. However, the fine on highest income earners has been reduced from 10% to just 9%, which the finance minister called was necessary to stop "brain drain". Advance tax on sale or transfer of immovable property has been increased from 3% to 4.5% on the value of Rs50 million property. The rate is jacked up to 5% from 3% on Rs100 million property while it is further increased to 5.5% from 4%, if the value exceeds Rs100 million. However, on the purchase of the property the rate is reduced from 3% to 1.5%, from 3.5% to 2% and from 4% to 2.5%, depending upon the value of the property. The economic transactions by the ineligible persons have been banned, if the value of the new purchases is more than 130% of the value of the total assets. Tight fiscal path In order to stay in the IMF programme, the government has proposed a fiscally tight budget, although it created room for political spending too. The government has proposed a budget deficit of Rs6.5 trillion or 5% of the size of the economy. The total size of the budget is Rs17.6 trillion, which is 7.3% less than this year's original budget due to relatively lower allocations for the interest payments in fiscal year 2025-26. The proposed budget deficit is 1.8% of the GDP or Rs2.4 trillion less than the original estimates of this fiscal year. The deficit may still be appearing large in absolute terms. But it is, for the first time, lower than this year's gap, both in terms of size of the economy and in absolute numbers. The defence budget has been proposed at Rs2.55 trillion, which is 21% or Rs436 billion higher than this fiscal year due to war with India. The armed forces development programme has been marginally increased to Rs300 billion, which is far lower than what the military had demanded. The government is projecting gross federal revenues at record Rs19.3 trillion for next fiscal year, higher by Rs1.5 trillion. The gross revenues are based on the FBR's tax target of Rs14.13 trillion and Rs5.2 trillion non-tax revenues. The non-tax income will mainly come from the Petroleum Levy where the government wants to collect nearly Rs1.5 trillion and the Rs2.4 trillion profit by the State Bank of Pakistan. Out of the Rs14.1 trillion FBR tax collections, the provinces will get Rs8.2 trillion as their shares in the federal taxes under the National Finance Commission (NFC) Award. This leaves the federal government with Rs11 trillion net revenues for next fiscal year, which will not be sufficient to meet the interest payments and inclusive of all defence spending. The government will borrow Rs6.5 trillion in the next fiscal year to finance the Rs17.6 trillion total federal budget. Under the IMF programme, the four provinces are also required to save Rs1.46 trillion from their revenues as cash surplus to bring down the national budget deficit to Rs5 trillion or 3.9% of GDP. This is steeper fiscal consolidation and would require all the five governments to meet all their revenue and expenditures related targets. The interest payments will eat 47% of the budget and the federal government's net income —after paying the provincial shares — will be Rs2.8 trillion more than interest payments. The next year's interest payments are estimated at Rs8.2 trillion, which is lower than this fiscal year due to substantial reduction in the interest rates. The finance minister announced a Rs716 billion BISP programme aimed at expanding the net to over 10 million beneficiaries and adding more children in the conditional cash transfer programmes.
Express Tribune
03-05-2025
- Business
- Express Tribune
Exalted tax target
Listen to article The government's intention to raise the taxation bar is fraught with consequences. Having seen a downward revision for the ongoing fiscal year owing to inflation and lower economic growth, the new target of Rs14.3 trillion is an uphill task. In order to attain it, it has to employ some extraordinary tools that may require at least Rs500 billion in additional measures. Will the beleaguered dispensation once again slap the salaried class and squeeze those who are already in the tax net is not difficult to guess! There are no two arguments that tax mosaic should be broadened but the point is how come that would be possible without introducing stringent reforms and bringing the holy cows into it. It is a given that big businesses, real estate, agrarian farming and land wielding are exempt from their due to the national exchequer, and coupled with it is the elite capture of the economy that swallows in more than $17.4 billion per annum, according to the UN. An increase of Rs2 trillion over the ongoing year's target, which would be equal to 11% of the projected size of the economy, will require some tightrope walking and a sustained roadmap. With little or no enthusiastic input from the private businesses in reforming the edifice of taxation, it is assured that the IMF will have the last laugh in setting the target and pointing out sectors that should go under the axe. While road-mapping tax measures, the government should keep in mind that piling on extraordinary burdens on common people would be self-defeating as regards harnessing the economy on modern lines. The FBR is already suffering from a tax shortfall of Rs833 billion in the first 10 months of the ongoing fiscal – something that underscores the inability to withstand tax escalation. A repeat of the fiasco as the tax gurus go on an arithmetic hype for book-keeping will call the bluff and derail whatever improvement the economy has made. It's time for the government to get real and broaden the tax territory by encompassing all in it.
Express Tribune
30-04-2025
- Business
- Express Tribune
FBR misses target by Rs833b
Listen to article The tax shortfall has ballooned to a staggering Rs833 billion in the first 10 months of the fiscal year, despite the government imposing record additional taxes and reducing refunds. Pakistan's tax chief, Rashid Langrial, as Pakistan's tax chief Rashid Langrial warned that the new budget will also challenging in terms of achieving targets. The shortfall exceeded the limit set by the International Monetary Fund (IMF) by over Rs190 billion. Last month, the IMF acknowledged that the annual target of Rs12.97 trillion was unattainable and subsequently revised it. Only in the month of April, the government added around Rs139 billion in tax shortfall, breaching commitment to the IMF that the shortfall against the original annual target will not be more than Rs640 billion. The Federal Board of Revenue (FBR) provisionally collected Rs9.3 trillion in taxes till end of April, falling short of the target by Rs833 billion, according to its provisional figures. The collection was still around 27% or Rs1.95 trillion higher than the previous fiscal year but not enough to stay on track. In terms of collecting taxes, this and the next fiscal year will be tough, admitted the chairman FBR before the National Assembly Standing Committee on Finance on Wednesday. He further said that this would leave little space for giving any relief in taxes in the budget. "But we are reducing taxes on the salaried class in the budget," said Chairman FBR without disclosing the quantum of relief. As of the end of March, the salaried class paid a record Rs391 billion in taxes, which were 56% or Rs140 billion more than the last year and 1420% higher than the taxes paid by the traders. The FBR sustained a whopping Rs833 billion shortfalls despite putting Rs1.3 trillion additional burdens in the last budget and it even did not spare the milk despite Pakistan being a nutrition deficient nation. The Pakistan Dairy Association (PDA), the representative body of packaged milk producers, on Wednesday sought the intervention of the National Assembly Standing Committee on Finance, to reduce the 18% sales tax on package milk that increased prices by up to Rs70 per litre. The PDA demanded to reduce the tax to 5% but the chairman FBR said that the IMF generally does not allow a reduction in sales tax rate but the government will consider the proposal in the budget. The standing committee recommended reducing the sales tax on package milk, as it was the highest tax rate on milk in the world. There has been over emphasis on increasing taxes, which has shifted the focus away from growing expenditures that are increasing at 24% pace during the current fiscal year, despite low single digit inflation. The Prime Minister has doubled the size of his cabinet, added more departments in an already bloated size of the government and approved to increase salaries of the cabinet members. For the month of April, the FBR's set target was Rs983 billion. However, despite taking advances and slowing refunds, it could collect only Rs844 billion. The FBR paid Rs43 billion in refunds equal to April last year despite collections growing by 29% on a monthly basis. Overall, the 10-month refund payments amounted to Rs428 billion Rs5 billion more than the last year. The IMF compelled 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-April period, the FBR missed its targets for sales tax, federal excise duty, and customs duty but again exceeded the income tax target on the back of over burdening the salaried class. According to the details, income tax collection amounted to Rs4.48 trillion during the first 10 months of this fiscal year, Rs325 billion more than the target. It was also Rs973 billion more than the last year. The burden was shared by the salaried class and the corporate sector, as the retailers and landlords still remained under taxed. Sales tax collection stood at Rs3.17 trillion, whopping Rs775 billion less than the target of over Rs3.95 trillion. The sales tax remained the most difficult area for the FBR and one of the reasons for low collection was less than estimated growth in large industries. The government had immensely increased the sales tax burden in the budget. However, the collection was Rs677 billion more than the last year. The FBR collected Rs602 billion in federal excise duty, Rs157 billion less than the target. But it was Rs149 billion higher than last year. Customs duty collection stood at Rs1.05 trillion, Rs228 billion below the target. The collection is hit by lower-than projected import volumes. It is also marred by manipulation of the goods declaration forms by the importers in connivance with the corrupt elements. It was Rs190 billion more than the last year. Meanwhile, the Pakistan Customs Officers' Association, in a general body meeting, condemned the growing trend of publicly targeting Customs officials without due process. It stressed that accountability must follow legal procedures, rejected media trials, and called for fair recognition of Customs' sacrifices and challenges in combating smuggling.
