A majority of the team members have agreed to extend GST to new products, but they are divided over reintroduction of the wealth tax, bringing exporters into the tax net and increasing the rate of income tax on real estate owners, as they fear a political backlash. – File Photo

ISLAMABAD: In what appears to be a move aimed at avoiding pressure from influential businessmen and land owners, the government has decided in principle to confine new taxation measures to the imposition of general sales tax on more commodities in the next budget, Dawn has learnt.

The understanding on these lines has been reached after marathon meetings held by the government’s economic teams headed by Finance Minister Dr Hafeez Shaikh, Planning Commission Deputy Chairman Dr Nadeem ul Haq, Finance Secretary Dr Waqar Masood and Revenue Advisory Council Chairman Dr Hafeez Pasha.

A majority of the team members have agreed to extend GST to new products, but they are divided over reintroduction of the wealth tax, bringing exporters into the tax net and increasing the rate of income tax on real estate owners, as they fear a political backlash.

A source told Dawn that tax officials were tasked to evaluate revenue impact of raising GST rates for some products and to extend it to new products in the budget. “Increasing the GST rate on domestic sale of textile products, carpets, and sports, surgical and leather goods is under consideration,” he said.

The government recently assured the International Monetary Fund to collect over Rs1,952 billion in revenue in 2011-12.

“We have given an outline to the IMF to focus on GST in the next budget to reach the revenue target,” an official said.

After the conclusion of recent talks in Dubai, the IMF also hinted in a statement that the coming budget would concentrate on GST.

The IMF had suggested that Pakistan would require higher revenue through tax reforms, including steps to implement reforms in the general sales tax. “We have reached an understanding with the IMF to only introduce new taxation measures in GST,” the official said.

An official in the Federal Board of Revenue said there was no concrete proposal about income tax for the budget.

“Apparently there is no proposal under consideration about income tax or federal excise duty,” he added.

The official said some senior officers in the FBR were opposing reintroduction of wealth tax. The government has constituted a committee headed by Dr Hafeez Pasha to look into the issue.

The wealth tax was scrapped in 2002 by the Musharraf government on the insistence of big real estate owners, including military personnel.

The official said the policymakers were divided over imposition of tax on agriculture income. He said the Revenue Advisory Council headed by Dr Hafeez Pasha had proposed to do away with the presumptive tax on wealthy exporters. Exporters are paying one per cent withholding tax at the time of realisation of export proceeds.

The official said the Pasha committee had recommended to the government to make withholding tax adjustable and make it mandatory on exporters to file income tax returns, but the senior finance ministry officials did not support the proposal.

“No-one, including the finance minister, takes seriously the proposal of the Revenue Advisory Council to bring affluent class in the tax net,” the official said.