Prime Minister Imran Khan has convened a special cabinet meeting today (Wednesday) at 2:00pm, which will be followed by a Pakistan Tehreek-e-Insaf parliamentary party meeting wherein, according to sources, Finance Minister Asad Umar will brief the party parliamentarians about the economic reforms package. Sources said that it was conveyed to the Cabinet Division verbally that the agenda and working paper would be distributed during the cabinet meeting.
Sources said that the Prime Minister will also chair the parliamentary party meeting. The Prime Minister will also take the cabinet members into confidence about his visit to Qatar and its outcomes. Sources in the Finance Ministry stated that senior officials of Finance Ministry and Federal Board of Revenue (FBR) are finalising the speech of the finance minister which will be shared with him on his return from Qatar. They added that a meeting would be held in Finance Division in the morning (Wednesday) to finalise the proposals.
The proposed measures in the package included abolition of customs duty, additional customs duty and regulatory duty on raw material for chemical, auto parts, sports goods, leather and engineering sectors. The finance minister may announce visa policy for foreign investors and simplification of procedure for clearance of their refunds in his speech. Sources said that the sales tax and withholding tax on used/secondhand machinery would also be abolished.
The chairman FBR is said to have voiced concern that proposed measures in the economic reforms package will have a negative impact on the revenue collection but, according to sources, revival of the industry was given preference over revenue during a meeting chaired by the Prime Minister on Friday last that was also attended by the finance minister, chairman FBR and advisor to prime minister on commerce and textile.
An official said that amendment bill 2019 was named as 'economic reform package' subsequent to criticism by the opposition. Under the 'Finance Supplementary (Amendment) Bill, 2019,' the government may provide a major tax relief to the filers of income tax returns by withdrawing withholding tax on cash withdrawal from banks above Rs 50,000 for filers. Under the said Bill, the government would increase 10 percent customs duty on the import of 1800cc cars and increase in duties and taxes on import of high end user mobile phone sets.
To discourage unregistered sectors/suppliers, 'Finance Supplementary (Amendment) Bill, 2019 is expected to increase the rate of sales tax from 2 to 3 percent on supplies made to unregistered persons.
As per last Supplementary Finance Bill, the tax slabs for individuals introduced through the Finance Act, 2018 resulted in a much lower incidence of tax upon affluent individuals earning high incomes and compromised on the core principle of progressivity and equity in taxation. In order to rationalise the tax rate on individuals and to ensure a progressively higher incidence of tax on individuals based on their "ability to pay," separate tax rates were introduced for both salaried as well as non-salaried individuals. Budget makers have also proposed revision in the minimum threshold of annual income tax slab down from Rs 1.2 million.
The government may provide some relief to stock market by reducing advance tax on sale/purchase of shares which stands at present at 0.02 percent, while capital gain tax (CGT) may be rationalised, as at present there are different slabs on it depending on the duration of holding securities by the investors.
Under Pakistan Customs Tariff, the government may bring down the customs duty slab of 21 percent to 20 percent, 16 percent to 15 percent, 11 percent to 10 percent and 6 percent to 5 percent through mini-budget.
The proposals under consideration included increase in sales tax on petroleum products, a raise in excise duty on cigarettes and vehicles (1600cc and above), increase in the rate of additional customs duty - from 2 to 3 percent - on imports and further increase in the rate of withholding taxes for non-filers.