New taxes of Rs255bn in FY14-15 budget likely

[Shabaz Sharif]

ISLAMABAD: The Pakistan Muslim League-N government is all set to introduce a number of revenue-generation measures in the budget for financial year 2014-15, including new taxes that are expected to yield an estimated Rs255 billion.

Sources in the finance ministry say these measures are likely to hit the middle class the hardest.

The new proposals, guided by Finance Minister Ishaq Dar, aim to bring down the budget deficit to 4.8 per cent next year from this year’s 5.7pc. The burden of this decrease will largely be shouldered by the middle class and non-industrialists as the cost of living is expected to increase as a result of the new indirect taxes.

The revenue measures are tailored to fulfil the conditions attached with the International Monetary Fund’s (IMF) Extended Fund Programme for Pakistan. The new revenue collection target was agreed upon by both sides at a recently-held IMF review meeting in Dubai.

Revenue generation measures may hit the middle class hard
In order to qualify for the next IMF tranche, the government has proposed a revenue generation target of Rs2,810 billion for FY2014-15, an increase of 24pc or Rs535bn from this year’s revised target of Rs2,275bn.

The IMF had given clear indications to Pakistan’s economic team regarding the finalisation of budget proposals if Islamabad wanted to bring down the fiscal deficit as per the plan agreed upon with the IMF.

On the orders of the finance minister, the tax proposals for the next budget are being based on three key pillars: the withdrawal of tax exemptions granted through Statutory Regulatory Orders (SROs); an increase in existing tax rates; and the bolstering of revenue collection by widening the tax base.

Sources told Dawn that additional revenue, over and above the current fiscal target of Rs2,275bn, would have to be met through other measures and the withdrawal of tax exemptions.

The exemptions granted through SROs currently stand at Rs480 billion. Of this, Rs103.96bn is expected to be withdrawn in the budget for FY2014-15.

However, the total amount of exemptions that can be withdrawn is Rs240bn. This means that the remaining Rs136.04bn in exemptions will be withdrawn over the next two years – FY2015-16 and FY2016-17.

New taxation measures may include an increase in the federal excise duty rate to 17pc, new adjustable taxes aimed at bringing the undocumented sector into the tax net and higher rates for non-taxpayers.

The expected measures also include the introduction of a string of new withholding taxes as well as an increase in the rates of existing ones and the withdrawal of customs exemptions and concessions.

However, it is yet to be determined whether the Federal Board of Revenue (FBR) can raise this money simply by imposing new taxes or will some part have to be collected through administrative measures, by plugging the many loopholes in the taxation system and improving revenue generation.

The finance ministry has projected growth in the rate of inflation at 8.5pc in FY2014-15 and expects the economy to grow by 5.5pc.

Due to inflation and economic growth, nearly Rs280 billion are expected to be raised in FY2014-15 outside of the tax measures.

Finance ministry sources say a proposal to introduce asset-based taxes is on the table, but it may be difficult for the PML-N to implement it because of the real estate mafia, which is an influential lobby within the party. It is a similar story with sugar, as general sales tax on the commodity stands at 8pc instead of 17pc, due to the influence of millers.

This year, FBR’s tax-to-GDP ratio is expected to fall to 8.8pc from the budgetary target of 9.9pc.

Talking to Dawn, former finance minister and Institute for Policy Reforms Managing Director Dr Hafeez A. Pasha says that Pakistan today has one of the lowest tax-to-GDP ratios in all of Asia; lower than Bangladesh’s 10pc, India’s over 16pc, Sri Lanka’s 12pc, Malaysia’s 14pc, Thailand’s 18pc, the Philippines’ 12pc and Turkey’s 21pc.

He said Pakistan’s taxation system did not collect as much revenue as it should and that there were far too many concessions and exemptions granted, which cut into the overall revenue generation figures.

Mr Pasha suggested that the principal focus of the tax proposals for FY2014-15 should be on the development of a direct tax regime, in order to make federal taxation more buoyant and progressive.

Published in Dawn, May 19th, 2014

 

[Fahad Khan 2]

Death to Dar
He is collecting debt from all over the world... Then also increasing taxes... what happen to these dollars.... The management of govt is so poor that they even don't know where to use debt money and Pakistan poor people are suffering in paying interest of these taxes.... This what happen when govt lad by industrialist come..... Inflation is sky rocketing....

The electicity gimmick they are playing on singing MOU will soon be exposed if they become materialized with heavy billing....

If we minus inflation, raised direct/indirect taxes, there is hardly any achievement in the revenue collection.

@Leader @RiazHaq @AUz @cb4

 

[airmarshal]

Instrad of direct taxation, these industrialist politicians are giving exemptions to the industrialists and burdening the common man.

 

[AUSTERLITZ]

''NOTHING IN THIS LIFE IS CERTAIN EXCEPT DEATH AND TAXES''-BENJAMIN FRANKLIN.

Same case here,VAT increased from 12% to fukin 20%..bleeding dry.

 

[IceCold]

Sher nu vote sirf industrialist na he nahi diya balka tahla wallan na be diya ha or in dono ka dermayan bechara middle salaried class mar raha ha. Aik wari zor sa ho jai dekho dekho kon aya......sher aya sher aya.

 

[SBD-3]

The exemptions granted through SROs currently stand at Rs480 billion. Of this, Rs103.96bn is expected to be withdrawn in the budget for FY2014-15.

However, the total amount of exemptions that can be withdrawn is Rs240bn. This means that the remaining Rs136.04bn in exemptions will be withdrawn over the next two years – FY2015-16 and FY2016-17.

New taxation measures may include an increase in the federal excise duty rate to 17pc, new adjustable taxes aimed at bringing the undocumented sector into the tax net and higher rates for non-taxpayers.

I hope everybody read the news properly before jumping into the comment section. Can anybody elaborate to me who are getting exemptions through SROs? is it middle class or pressures groups?
And adjustable WHT only stings those who don't pay taxes.

 

[ajpirzada]

Dar suspends order aimed at tax evaders - Pakistan - DAWN.COM

he is least bothered about tax evasions and has the audacity of increasing taxes on those who dont evade! we are living in such a wonderful land where poor and the rich both get subsidies from the lower/upper middle class.

 

[SBD-3]

Dar suspends order aimed at tax evaders - Pakistan - DAWN.COM

he is least bothered about tax evasions and has the audacity of increasing taxes on those who dont evade! we are living in such a wonderful land where poor and the rich both get subsidies from the lower/upper middle class.

Perhaps this would make it a bit clear so as to why this SRO was repealed

 

[ajpirzada]

Perhaps this would make it a bit clear so as to why this SRO was repealed

and how does it make sense? karobari baradri ko kub shauq tha tax daynay ka? and why should FBR not have a right to check on businesses randomly? Or are we going to inform the thieves from now on before paying them the visit? especially when we have been suffering from such a big taxation crisis since many years.

but instead we only see all sorts of relaxations given to evaders in one way or the other. And to make up for the losses, the person already paying taxes will be bulldozed with more taxes.

 

[SBD-3]

and how does it make sense? karobari baradri ko kub shauq tha tax daynay ka? and why should FBR not have a right to check on businesses randomly especially when we have been suffering from such a big taxation crisis since many years.
but instead we only see all sorts of relaxations given to evaders in one way or the other. And to make up for the losses, the person already paying taxes will be bulldozed with more taxes.

There is always a carrot and a stick with these types of groups. Why do you think that even with the position of power, Mush also left the tax payment to self assessment and self audit? Why there have never been any attempt for documentation of economy, even with generals being in power -who supposedly are `a-political'? Just another example, do you remember a while ago how much hue and cry this community made when it was decided to give FBR access to bank accounts? These people emptied their bank accounts overnight, forcing banks to request SBP to put a hold on the process.This isn't just a matter of "do it" but rather a delicate one.

 

[ziaulislam]

I hope everybody read the news properly before jumping into the comment section. Can anybody elaborate to me who are getting exemptions through SROs? is it middle class or pressures groups?
And adjustable WHT only stings those who don't pay taxes.

actually its not delicate or problematic, problem is like any other party PML N is compromises people of tax evaders that enforces govt to make sure that pooor are crushed under sales and with holding tax while the upper class role in money.
zero property tax, low taxation on certain industries, zero profit audits, zero stock exchange audits means that pakistan is a heaven for upper class and hell for lower class

Exceptions are mostly for businessman importers and exporters
do you know that despite having the highest sale tax (20% IN TELECOM!!! and withholding tax perhaps in the whole world (india e.g has 10% sales tax), our taxation is pathetic. this year 15% increase is only due to increase sale tax, withholding tax and growth in econmy not due to any govt efforts.

to be honest PML N performace in TAXATION has been worse than PPPP first four years.
however, their performance in other sectors has been better.

the only reason i voted for PTI(not sure now, seeing their KPK performance) was their promise of tax reforms

 

[SBD-3]

the only reason i voted for PTI(not sure now, seeing their KPK performance) was their promise of tax reforms

And what tax reforms -if any- have they introduced in KPK so far? All i know was there was only one tax proposed and that too on afghan transit trade in their first budget.....

 

[ziaulislam]

And what tax reforms -if any- have they introduced in KPK so far? All i know was there was only one tax proposed and that too on afghan transit trade in their first budget.....

none of course, thats what i am saying but does this justifies zero tax reforms of PML N.
secondly nearly all control of taxation lies with the centre

 

[SBD-3]

none of course, thats what i am saying but does this justifies zero tax reforms of PML N.

They did make a concious effort by trying to document and all the new taxes (aside from 1% increase in GST) were Adjustable WHT, whereby anybody who had an NTN and filed a return could get the tax reimbursed. Yes if you say about dramatic tax changes, then the pressures groups in the country would not allow that to happen. Like i said before carrot and stick is what should be adopted, not merely using the stick.

secondly nearly all control of taxation lies with the centre

Income Tax, GST and FED yes. But Taxes on Property, Excise, Agriculture and Services are delegated to provinces post 18th Amendment.

 

[ziaulislam]

They did make a concious effort by trying to document and all the new taxes (aside from 1% increase in GST) were Adjustable WHT, whereby anybody who had an NTN and filed a return could get the tax reimbursed. Yes if you say about dramatic tax changes, then the pressures groups in the country would not allow that to happen. Like i said before carrot and stick is what should be adopted, not merely using the stick.

Income Tax, GST and FED yes. But Taxes on Property, Excise, Agriculture and Services are delegated to provinces post 18th Amendment.

carrot doesnt work.
did the tax amnesty work?
massive tax frauds happen in imports and exports . the known fraud and exceptions is in billions