Finance Minister Muhammad Aurangzeb will announce budget proposals for the coming fiscal year in a short while today, but experts are torn and have little expectations that any innovative measures would be introduced to increase tax revenue that would enable the government to divert resources to Pakistan’s economic growth.
“A lot of revenue measures will be taken. It seems a lot of it will be indirect in nature, and targeted towards under-taxed sectors,” said Samiullah Tariq, Head of Research and Development, Pakistan Kuwait Investment Company.
Tariq said the whole supply chain will probably be taxed.
“It will appear that the tax base is widening, but eventually it will be passed on to the consumers.”
Renowned economist Kaiser Bengali, however, said a stagnant economy cannot be burdened with more taxes.
PERSPECTIVES: Pakistan’s salaried group is rightly anxious ahead of the budget
“A greater priority should be non-development including non-combat defence expenditure to reduce the budget deficit,” he said.
Pakistan Software Houses Association (P@sha) Chairman M. Zohaib Khan said that the body has asked the government to reduce taxes on the IT sector workforce from 35% to 5%.
“It will help increase tax revenues for the government too,” he said.
He said that most of the IT sector companies have listed their employees as freelancers so that tax is paid 1% for unregistered and 0.25% for registered freelancers.
He added that the IT sector was also expecting a 100% dollar retention account and tax holiday as it will serve as a marketing tool to attract foreign companies to open offices in Pakistan.
Former P@sha chief Syed Ahmad said that he is expecting Rs26 billion for the IT sector.
“However, Rs16 billion is actually loans from Koreans for tech parks, a decade old project, and Rs10 billion for skills and marketing for PSEB and NAVTCC (both government entities).”
Meanwhile, auto sector expert Mashood Khan said the auto industry, already weakened over the past 2.5 years, is in urgent need of support and strategic direction. As observed in the last Finance Minister’s speech, the industry’s growth has been stagnating at a mere 1.25%.
“I expect that the upcoming budget will set the tone for the next five years, establishing clear trends and priorities for the sector’s revival. The government must prioritise industrialisation as its top agenda.”
Additionally, there should be measures to ease access to financing, reduce bureaucratic hurdles, and provide incentives for innovation and modernisation.
“Our primary focus must be on increasing our foreign exchange reserves and enhancing local production and localisation. If we fail to take these crucial steps, we risk finding ourselves in economic trouble again in a few months.”
Earlier, Business Recorder reported the government is likely to fix over and above Rs12 trillion tax collection target of the Federal Board of Revenue (FBR) for 2024-25 as compared to Rs9.4 trillion for 2023-24, reflecting a massive increase of over Rs2.6 trillion.
Sources told Business Recorder that the revenue measures to the tune of Rs1,500 billion to 2,000 billion are expected to be announced today (Wednesday).
The Finance Bill 2024 is also expected to further raise regulatory duties and other duties on the import of non-essential/luxury items and finished products.
The withholding tax rates including imports, contracts, services and supplies are likely to be increased in budget (2024-25). In the case of non-filers, the withholding tax rates would be increased on different financial transactions of un-registered persons.
The government may increase advance income tax on the import of raw materials by commercial importers by one percent.
The FBR has proposed 2.5 percent tax on the entire business supply chain, from manufacturers to retailers. The income tax slabs for the salaried class is expected to be revised under the new Finance Bill, sources said.
One of the revenue measures proposed is to raise advance tax on the purchase of immovable properties. The FBR has imposed three percent tax on filers and 10.5 percent tax on non-filers during the current fiscal year, and it collected nearly Rs80 billion during this year.
Sources said that a three percent tax has been proposed on filers and six to seven percent tax on non-filers for the purchase of property upto Rs50 million.
Similarly, four percent tax on filers and 12 percent tax on non-filers have also been proposed for the purchase of property worth Rs50 million to Rs100 million.
Furthermore, five percent tax on filers and 15 percent tax on non-filers have been proposed for the purchase of property worth over Rs100 million.
The government is all set to impose federal excise duty (FED) on nicotine pouches and e-cigarettes. At present, there is no FED on nicotine pouches.
The measure is estimated to generate revenue to the tune of billions. The FBR has proposed a standard rate of 18 percent sales tax on a number of zero-rated items and exempted goods including dairy and stationery items in the budget (2024-25).
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