Senate committee proposes higher taxes on high-income individuals


ISLAMABAD: The Senate Standing Committee on Finance on Tuesday finalised its recommendations with a notable change to slightly raise the tax rates for higher income individuals.

The proposals finalised at the committee level will be presented in the Senate for adoption which will be then referred to National Assembly for giving it the final nod. However, the Senate recommendations are not binding to be included in the finance bill.

The only proposal with a considerable implication in terms of revenue was the upward revision in the salary slabs for higher income-earning individuals. It was unanimously recommended to revise upward the taxable slab to 25pc from the proposed 15pc.

In the budget, it was recommended to scale down tax rate to 15 percent from 35 percent for individuals including salaried class. However, the exemption level which was enhanced to Rs1.2 million from Rs400,000 was approved without making any changes on the plea that it will benefit the lower salaried class.

The senators were of the view that bringing down of the upper slabs to such a low level was meant to influence these individuals ahead of the next elections. The massive change in tax slabs will increase their net income tremendously. “This is a popular measure, with no economic justification,” Committee Chairman Farooq Naek observed. He was supported by the senators from opposition parties.

After recommending upward adjustments in tax slabs, Federal Bureau of Revenue (FBR) officials informed the committee that the revision will give a benefit of more than Rs20 billion in revenue in the next fiscal year. It is estimated that the changes made in the tax rates will cause a revenue loss of Rs90bn per annum.

Invited to assist the committee on tax-related matters, former federal secretary finance Dr Waqar Masood said the slight changes made in the taxable slabs will help to some extent in saving the revenue loss. However, he observed, some correction has been made which will benefit the tax system.

The representatives of Federation of Pakistan Chambers of Commerce and Industry, cigarette manufactures and Nestle Pakistan were especially invited to give their feedback on the budget proposals.

The committee, however, largely rejected their proposals for inclusion in the Senate recommendations. The senators who represent special businesses made their specific proposals, which are related directly to their interests, and sailed through the committee successfully.