New tax raising steps under consideration

ISLAMABAD: The proposed revenue measures to be taken through the Presidential Ordinance may include an increase in the rates of withholding taxes, more indirect taxation, three percent flood levy on imports, and tax on banks’ foreign exchange income.

Sources told Business Recorder on Tuesday that the additional revenue measures would mostly cover indirect taxes and increasing rates of withholding taxes (WHT). The three percent flood levy could generate additional revenue of Rs60 billion. The government is also considering imposing tax on banks’ foreign exchange income.

Some other proposals under examination are to increase taxes on sugary beverages and tobacco, and the rate of withholding taxes may be enhanced on property transactions.

Another proposal is to raise the capital value tax rates on imported and locally-assembled vehicles. In this connection, the revenue impact of different withholding taxes is under consideration.

Rs550bn tax gap largely falls in five sectors: FBR

The initial draft of the Presidential Ordinance has been prepared incorporating proposals of three percent flood levy on imports and tax on banks’ foreign exchange income. However, there is no further development on the said ordinance.

According to the sources, the FBR has repeatedly requested the government to impose 17 percent sales tax on petroleum products to generate additional revenue equivalent to the amount of projected revenue of Rs60 billion through the promulgation of the Ordinance. The FBR can easily impose sales tax through a notification.

However, the FBR has been unable to get the approval of Finance Minister Ishaq Dar to impose sales tax on petroleum products.

In November 2022, the Economic Coordination Committee (ECC) of the Cabinet had deferred the Federal Board of Revenue (FBR)’s proposal seeking the imposition of 17 percent sales tax on High Octane Blending Component (HOBC) and RON-97.

The FBR has estimated to collect Rs7,300 billion by the end of 2022-23 against the assigned target of Rs7,470 billion for the ongoing fiscal year.

The customs duty collection witnessed a major decrease during the first half (July-December) of 2022-23 due to the import compression. The FBR’s Inland Revenue has estimated that they would be able to achieve the assigned tax collection target in the second half (Jan-June) period of the current fiscal year, so the income tax, sales tax and federal excise duty (FED) related targets would remain intact.

Copyright Business Recorder, 2023