Little or no relief in fiscal year 2014 Budget: Rs 200 billion taxation measures proposed

The Federal Board of Revenue has proposed load of taxation measures of Rs 200 billion with little or no tax relief in Budget (2013-14). Sources told Business Recorder here on Monday that the Ministry of Finance has agreed to the taxation proposals of FBR to the tune of Rs 200 billion. The idea is to take maximum revenue generation measures to overcome revenue shortfall in future and generate additional revenue in 2013-14.
For the first time, record taxation measures of Rs 200 billion are expected in the Budget (2013-14). The major taxation measures include proposed increase in the standard rate of sales tax from 16 to 17 percent, imposition of the federal excise duty (FED) on commodities on which exemption was granted in Budget (2012-13) and imposition of sales tax on items subjected to sales tax zero-rating at domestic stage.
Another key proposal is to impose standard rate of sales tax on domestic zero-rated items instead of introducing a lower sales tax rate of 2-3 percent. The items covered under sales tax zero-rated regime at local stage may be subjected to standard rate of sales tax. The upcoming budget would be different from the traditional budgets presented by political governments. This year''s focus is to increase tax rates and withdraw exemptions. Budget makers are not ready to accept any major proposal which would provide tax relief causing huge revenue loss.
According to sources, budget makers in the FBR and the Ministry of Finance have finalised maximum indirect taxation with withdrawal of exemptions and zero-ratings. The tax policy for budget 2013-14 is to either provide very nominal tax relief or no relief due to revenue implications. In last budget, FBR has taken measures to generate Rs 63 billion, relief measures accounted for Rs 31.220 billion resulting in net impact of Rs 31.772 billion in 2012-13. During current budget preparation exercise, the FBR is exploring each and very option to generate revenue through withdrawal of exemptions or increase in the tax rates. In this regard, extraordinary taxation measures are expected in Budget (2013-14).
One percent change in the sales tax rate would have an impact of Rs 35-40 billion per annum. In case the proposal is implemented, across the board standard rate of 17 percent sales tax would be implemented in 2013-14. The budget preparation exercise has been carried out without consultations with any political party and their manifestoes have not been taken into account, sources added.