ISLAMABAD: The government has so far collected Rs9 billion on account of capital value tax (CVT) on local and foreign assets.
Sources said that in a brief to the Senate Standing Committee on Finance, the Federal Board of Revenue (FBR) stated that Pakistan has been passing through harsh economic times for the last so many years and in order to enhance revenue collection and reduce the fiscal deficit, taxes are imposed which, unfortunately, are skewed in favour of indirect taxes.
The meeting was informed that the collection of CVT of Rs3,194 million and Rs6,045 million from foreign assets/ immovable property and motor vehicles and others respectively, has been made in the last 10 months since the operationalising of this law.
Pre-budget talks: Senate panel to meet stakeholders from next week
The indirect taxes are easy to collect and; therefore, efficient but problematic on account of regressive nature of their incidence on low-income persons. This defies the basic principle of tax policy regarding fairness and equity.
There was a conscious shift in the tax policy of the government in 2022 when new major taxes were introduced in the nature of direct taxes where the burden of such taxes directly falls on the person who has ability to pay such tax instead of its burden falling on low-income persons.
Among such policy initiatives taken in the fiscal year 2022 budget, major direct taxes are; (a) CVT on foreign assets of resident persons; (b) CVT on new vehicles purchased locally/ imports; (c)deemed income tax on excess immovable properties of resident persons; (d) Supertax on high-income persons exceeding income beyond Rs150 million.
CVT has been imposed on the wealth of such persons with the idea of ability to pay and equity which necessitates that the affluent classes should be made to pay an increased burden of taxes which would also ensure redistribution of wealth — a basic tenet of taxation. CVT is levied on foreign assets of resident individuals exceeding Rs100million in value and motor vehicles exceeding engine capacity/ battery power of 1300cc/ 50kwh.
Value of assets is to be determined in case of foreign assets, the total cost of foreign assets on the last day of the tax year converted into Pakistan rupee at SBP notified exchange rate as on 30 June 2022.
In case of vehicles the value (inclusive of all duties); (i) value assessed by Custom authorities in case of imported vehicles; (ii) ex-factory price in case of locally manufactured vehicles. And; (iii) auctioned value where vehicle have been auctioned.
Copyright Business Recorder, 2023
Comments
Comments are closed.