No major change in tax rates is expected during the next fiscal budget as there is a general understanding in the Federal Board of Revenue (FBR) that any change would lead to unnecessary hue and cry on the part of taxpayers, said the Board sources.
However, they have hinted at a reduction in the rate of general sales tax (GST) to boost economic activity during the next fiscal. The rate of GST is likely to fall substantially, they added.
The sources further confided to Business Recorder that the demand of a zero-rating regime for the five export-oriented sectors would not be entertained by the Board. Instead, they said, the Board management is considering continuing with the trend of speedy disposal of refund claims which has started since the start of coronavirus pandemic in the country. So far, 91 percent refunds have been paid off to their claimants, they added.
They said efforts were afoot to ensure the immediate release of refunds to their claimants in order to keep their liquidity positions intact. Successful models relating to the immediate release of refunds are under consideration of the Board in order to get rid of the prevailing trend of undue delay in release.
The sources said the Board was holding online meetings with various stakeholders to finalise taxation. However, it has been made clear to many business associations that no big change is likely to take place in the tax rate to ensure maximum revenue generation during the next fiscal year when economic activity would resume. However, the sources said, the working paper has also been prepared on ways and means to deal with the situation in case the impact of Covid-19 continues during the first two-quarters of the next fiscal year.
According to the sources, the FBR would have to generate Rs1200 billion additional revenue to meet the next fiscal year's revenue target of over Rs5,100 billion, as the Board would not be in a position to meet the revised target of Rs4,300 billion for the current fiscal. They said the Board would face difficulty in collection revenue due to the late start of economic activity in the holy month of Ramadan and Eidul Fitr.
It may be noted that a good number of tax experts have been agitating in the past to let the provinces collect sales tax on goods besides the services. They believe that there is no meat in the argument of the federal government that the provincial tax machinery has no capacity to collect, as all the federal government officers are promoted to the federal government once they serve in provinces. They further added that the provinces have administrative sources to collect sales tax from retailers. The Board sources, on the other hand, believe that it is not possible without a change in the Constitution. However, the tax experts are of the view that the federal government can extend this responsibility to provinces through an order.
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