Finance Minister Ishaq Dar and Finance Secretary Tariq Bajwa are said to be critical of Federal Bureau of Revenue’s latest budgetary proposals, as per a media report .
Mr Dar expressed disapproval of a further 1% increase in sales tax to an already 2% extra applicable on unregistered persons. If approved the ceiling for the sales tax would have become 20%. It is pertinent that only 150,000 persons file sales tax returns currently.
Instead, Mr Dar proposed to increase the 1% minimum tax rate applicable on turnover of all businesses (sole proprietors , AOP’s and companies) with turnover in excess of Rs 10 million annually. This tax is applied to businesses even if it is in losses. Last year the government had kept this rate stagnant at 1% but reduced the threshold turnover level from Rs 50 million to Rs 10 million, thereby including many more smaller businesses into the ambit of this regime.
The finance ministry seeks to increase the revenue collection by over rupees four trillion in the next fiscal year. The ministry intends on imposing taxes on non-filers. The ministry’s vision, therefore, entails an increase in tax rates for individuals and companies that do not file returns.
It is reported that the tax on dividend income of non-filers would rise from 20% to 25% in the new financial year. On the other hand, Tax rates would rise from 12.5% to 15% on dividend income for filers, adding rupees five billion in revenues.
Another proposal seeks to increase the tax on profit from debt, securities and bonds by non-filers. The existing rate for non-filers is 17.5% while that of filers is 10%.
As per the proposal, FBR will treat returns submitted by non-filers as final and will only pay a certain amount back if returns are filed afterwards.
The ministry had sought to draw a distinction between filers and non-filers in order to expand the tax base by providing tax rate incentives to the latter. However, the policy has so far seen little accomplishment and the tax base still remains narrow.
The new policy proposal would increase the revenue collected by FBR from indirect taxation. The department’s reliance on indirect revenue receipts would exceed 90%. The proposal renders convenience for the department as it aims not to increase the tax base.
The Ministry of Finance has expressed reservations that the new policy will only add to the burdens of existing taxpayers, said sources.
On the contrary, FBR has stated that the new policy is instrumental to achieving an extra Rs 500 billion in tax receipts for the upcoming financial year. Further, the department has expressed reservations for “too many” rejections of its proposals by the ministry.
The finance ministry seeks to increase the revenue collection by over rupees four trillion in the next fiscal year. The ministry intends on imposing taxes on non-filers. The ministry’s vision, therefore, entails an increase in tax rates for individuals and companies that do not file returns.
It is reported that the tax on dividend income of non-filers would rise from 20% to 25% in the new financial year. On the other hand, Tax rates would rise from 12.5% to 15% on dividend income for filers, adding rupees five billion in revenues.
Another proposal seeks to increase the tax on profit from debt, securities and bonds by non-filers. The existing rate for non-filers is 17.5% while that of filers is 10%.
As per the proposal, FBR will treat returns submitted by non-filers as final and will only pay a certain amount back if returns are filed afterwards.
The ministry had sought to draw a distinction between filers and non-filers in order to expand the tax base by providing tax rate incentives to the latter. However, the policy has so far seen little accomplishment and the tax base still remains narrow.
The new policy proposal would increase the revenue collected by FBR from indirect taxation. The department’s reliance on indirect revenue receipts would exceed 90%. The proposal renders convenience for the department as it aims not to increase the tax base.The FBR has also proposed a reduction in withholding tax on commercial importers from 5.5% to 4%. However, it has suggested an increase to 2% in the tax on imports made by the industries. The rate difference is being proposed to stop the misuse of the facility.
