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ISLAMABAD: The PTI-led coalition government looks set to reverse the tax concessions of the previous government which were designed to benefit high-earning individuals substantially more than the middle-class workforce.
The government is also considering an amnesty scheme for over a million people who are being selected for income tax audit over the years, but the Federal Board of Revenue is facing problems to clear this huge pendency.
Besides, a series of measures are being proposed that seek to impose quantitative restrictions, increase rates of regulatory duties and, in some cases, restrict imports of certain commodities to control the rising import bill of the country.
See: What is being discussed in the new Camelot occupied by PTI?
Exemption threshold to be revised downward to Rs800,000 from Rs1.2m; PSDP to be cut to Rs700bn from Rs1,030bn
The previous PML-N government had given sweeping tax cuts to low salary earners, raising the exemption threshold almost three times to Rs1.2 million from Rs400,000. As a result, estimated 700,000 taxpayers fell out of the tax net. The total return filers in the tax year 2017 were 1.4 million.
Instead of enjoying zero tax, a nominal tax of Rs1,000 for individuals in income brackets ranging from Rs400,001 to Rs800,000 and Rs2,000 for individuals in income brackets ranging from Rs800,001 to Rs1.2m was proposed in the budget.
“We have decided to rationalise the exemption threshold,” a senior tax official told Dawn. He said the exemption limit would be revised downward to Rs800,000 for individuals, claiming that there would be no major impact in take-home salaries of individuals. “We will not take back maximum relief from low income earners,” he said.
For higher income earners, the previous government had scaled down the maximum slab to 15 per cent from 35pc in one go. “This rate will be revised on higher income bracket upward to minimise the tax impact,” the official said without specifying how much.
According to him, all these proposals regarding slab-wise tax rates and exemptions threshold are under consideration and a final decision will be taken by the cabinet.
This drastic reduction in tax liability perpetuates the regressive character of the taxation regime in Pakistan and is against the global tax system. The reforms were not just reducing tax slabs, but surrendering Rs100 billion in taxes to high earners in the country.
The proposed amendments also include an upward revision in withholding tax rates for non-filers. The purpose is to increase the cost of non-compliance for such people.
Over the years, audits of one million people are pending with the FBR. For disposal of the audit cases, it has been proposed to offer a one-time amnesty scheme to those who are being selected for tax audit by paying 25pc extra tax over and above the taxes already paid. Those who pay the extra tax will be cleared from the audit.
The FBR is also considering revising rates on cigarettes. “This proposal is under consideration to enhance upward the rate in the third tier,” the official said, adding that the previous government had given more than 50pc relief in third tier, causing a huge revenue loss.
One of the aims of the proposed amendments is to bring down the overall import bill. Several proposals are on the table in this regard, the official said.
On the customs sides, it has been proposed to enhance further regulatory duties on 1,500 tariff lines. Last year, the import of 700 lines dropped owing to regulatory duties.
The commerce ministry and customs are working on a list of items which will be subject to quantitative restrictions and restrictions on their imports. These items will include mostly luxury and other consumption items to discourage “non-essential” imports.
On the development side, the government is also considering making a drastic cut in the Public Sector Development Programme to Rs650bn-Rs700bn from budgeted approved target of Rs1,030bn. The move is part of bringing down the budget deficit which reached 6.6pc of GDP during the fiscal year 2017-18.
Published in Dawn, September 13th, 2018
Comments (67) Closed
These measures will fail, because they target civilians. Unless, the judges, generals, and heavy duty bureaucrats with vast properties start paying their real share of taxes; the civilians will avoid paying also. This is a fact.
Unfortunately, Economic c team is back in squeezing people who work hard. You should focus on reducing government employees, reduce regulation, and automate. Evaluate at PIA, Railways, Steele mill and other government , semi government corporations and reduce resources with 35%. They are an expense. Let market forces take the lead. Taxation will scare innovators away and keep mediocre in action.
These austerity measures are essential and will help boom the economy. Lot more work to do to fix trade deficit. Common man will not be greatly affected by these measures but it will help to boost economy at greater levels.
Tax is good but if Gov first Create a Model.
Make awareness publicaly and explain advantages of Paying Tax. Every one should pay Tax. A.Start with 10% Tax for low earner. B. Middle earner 15% and C.high earner 30%
Will the govt. also consider reducing the Rs.1.1 Trillion Defense Budget? Or is austerity only for civilians?
More burden on the poor. Welcome to Naya Pakistan!
It was a completely political move by the PML-N govt why did they reduce the taxes at the end of their tenure..., we all knew this was coming.
PTI promised to give a lot of things to the people before elections. After elections, they are taking away a lot of things from the people. Pay more taxes, give more donations. If people have to do everything what is the govt doing?
Good measures. The previous govt was just trying some pre-poll rigging with the massive tax cut but it failed.
we are a developing nation and cant afford to pay 15pc tax only.
The simplest way was to cut the defence budget and reduce GST. This will have a positive impact on both remittance senders and investers alike. It is the trust that lacks. Cutting PSDP means cutting public quality of life.
@Najum judges journals are salaries paid so their tax is deducted prior when they are paid
Although I support PTI due to their honest efforts to improve Pakistan's plight, I am totally against this reversal of taxe brackets which provided much needed relief to salaried class. Why all tax measures are directed only at salaried class whereas the rich and elites of the country are not salaried class but they are businessmen, landlords, feudals, brokers, doctors, lawyers etc. What the govt is doing to levy taxes on their huge income?
Most of the doctors and lawyers take cash and pay no taxes at all. Doctors in big hospitals earn close to 50 lacs per month easily only from one hospital on consultation fees. Lawyers charge this amount even on one case. Why they are allowed to collect cash and save that under their pillow to buy huge plots in Defence? Why all businessmen evade taxes and do not show their real sales and income? They continue to become rich whereas salaried class gets poorer and poorer living in rental places throughout their lives as they cannot even afford to buy a plot before their retirement age. Massive injustice going on in the society!
How they define high earners? The one who can cover the monthly budget of his/her kitchen is that person regarded as high earner? They should bring those people to tax net who are not filing taxes rather than keep on pushing the salaried class. And those here in the discussion who are claiming that taxes are deducted from salary so nothing more expected must realize it is a duty to file taxes as well and PTI government should focus on it. Secondly, if government is planning to increase taxes they should take back increase in fuel/gas prices and should freeze it till the purchasing power of the public is increased. Third, there should be legislation ( like Iran and many other countries ) to protect the working class employed with private companies as they are getting very little raise despite huge inflation
please tax the big agriculturalists like Shah Mehmood, Jahangir Tareen etc to start paying taxes on their agriculture outputs and also their shrine's income. these thing will help a lot. we have many of these Shah Mahmoods and JTs in pakistan
The government has to take drastic measures to sustain by cutting the defense budget at least by a quarter, heavy taxation on big agriculture landowners, getting rid of big losses making public sector companies like PIA. Railway, Steel Mill etc. Simply squeezing the general public who is already burdened by inflation and scarcity of jobs- will surely not bring prosperity.
Don't do that . You are going to bring the working class under more pressure. Raise duties on luxury goods.
How easy is to grab the neck of poors... if you are taking the tax relief back then you should also announce free education, free medical, lower the fuel prices and withdraw the GST because we are paying the taxes twice... income tax and the GST on everything that we purchase...
@Anon a real tough question :)
@Baseer
No it is more much more rational approach and realism. Budget designed by PMLN just before the elections was to attract votes. Lesser tax collection automatically results in debt burden.
every second or third person is doing business and they earn a handsome amount, main target should be the business class people
@Anon can not reduce defense budget at any cost, because this is national security.
PSDP program is reduced but when corruption would get curbed, end result would be increase in work related to PSDP ... because even when PSDP in budget was approved Rs 1030 billion, around Rs 600 billion would have gone in the pocket of corrupt politicians and bureaucrats and what would have got left for PSDP, that is Rs 430 billion, contractors would have taken Rs 250 billion without work. That means, real effective PSDP would have been Rs 180 billion. That means, if Imran government is allocating Rs 700 billion for PSDP than due to minus corruption, effective development work would be of Rs 700 billion, or 4 times what last government had promised.
Also finish tax rebate on the name of research and teaching. This is being misused. Everyone who earns money should pay tax whether earned by teaching, doing research or something else.
@Anon: Pakistan should increase defence budget. Pakistan facing India whose defence budget is ~$63 billion ~ Rs 7800 billion. It is really asking too much from Pakistan forces to defend Pakistan and Kashmir with defence budget of Rs 1100 billion or 7 times less than India.
I think, if Pakistan defence budget is not equal to Indian defence budget than it should be at least a third or Rs 2600 billion instead of Rs 1100 billion.
As for expenditure Pakistan ministers and PM used to do (in past), that is 4 to 5 times more than Indian counterparts and that is ridiculous. I appreciate that Imran noticed that and now reduced this expenditure substantially.
What is the difference between this government and previous government if they want to rub the same oppressed people who are already paying taxes on their salary (though rate is lower now). Why don't they work hard to increase the tax net instead of keep rubbing the same lot of salaried people who are already paying tax for ages while seeing rest of the people enjoy on their money without paying even a single penny under income tax regime.....
Almost everybody is corrupt in all politicians party and set policies in their own favor.
I don’t agree with this. Lowering the tax rate has increased disposable income of salaries individuals; thus they would be spending more and hence economy will keep on revolving. Think again PTI; this step will not be appreciated to a lot of salaries class PTI supporters.
Welcome to Naya Pakistan
The government should cut the SPS given to government employees. There is always 10-20% salaries increase in every budget yet tax returns are minimal specially those who are on 18 Grade and above. There are several adhoc allowances which does not cover in taxes. Plus armed forces service high rank officers retired or in service are owning several lucrative properties and dealing in commercial activities that should be taken care for. Properties dealers get 2% on rent deal and50% on commercial deals yet they don’t fall in the tax racket. Private schools colleges universities charge hefty amount from parents yet how much they give any one guess. Dual nationals save tax while doing business in Pakistan by showing them selves as other countries nationals get exemptions and perks. They should surrender Pakistani nationality. I hope many other flaws can be highlighted to Asad umar or Imran Khan
Good measure.
Government should also target land lords who export their crops outside and earn millions. there is a huge catch there..but not for the low earning poor farmers.
Also there should be property tax on the cultivated land based on the area slabs for land lords. Major part of Pakistan production is agriculture and we have no control on these land lords.
The PTI Govt. is hellbent on removing the Civilian employees from the soil.
They don't have the guts to take any decision. They will study and do nothing. Just like they have studies CPEC, Gas Prices etc.
The beginning of a new Pakistan... Roll back...give in ... and U-turns...Throw me to the wolves and I will come back leading the pack and that should be the attitude and that should be the mindset...rich, corrupt and elite getting by with everything and the poor and weak are being penalized...
@Z in European countries tax for low earners is 20% for higher earners is 42%. Sales tax is 22% on goods.
Exemption upto 1.2m in Pakistan is ludicurious. In UK where people earn quite a few times more than a similar job in Pakistan, the tax threshold is £10k. I think Rs 400k is still pretty generous. If we want Pakistan to progress, Pakistanis would have to pay taxes with full honesty otherwise keep living on loans and aid and stop complaining.
This shows that govt has no different plans for boosting economy. Same traditional steps to increase tax over active tax payers is disgusting it will hurt the Lower and Upper middle class. Sher was Good.
Brilliant idea, there should be more focus on bringing the Agriculture Value addition and retailing sector into the tax net.
Overseas Pakistanis should also be brought into Tax Net by imposing a minimal 2-5% income tax and a wealth tax as well. In a similar fashion the property owned by Overseas Pakistanis should be liable to a higher Tax bracket as these are the people with means and can afford it. I being an overseas Pakistani all my life, i am willing for it and most of us will. Now, after the Voting Rights given to us we also come in the bigger picture of decision making in the country.
2nd or 3rd Property in a single breadwinner family should be taxed at 200% & 300% respectively, this will discourage the trend of investment only in property and will also help lower the housing market and make it more affordable for the masses.
What happened to the govt's vows about bringing looted money back and holding the corrupt to account that was supposed to bring huge relied to the country and its people? Secondly, we are told that we are short on Forex and also have a huge import bill. What part of imposing taxes in Pakistani Rupees is supposed to bring in Forex and reduce the Import Bill? The salaried class in already paying GST, various tariffs and duties as indirect taxes to the tune 20% to 40% from PTCL and Electricity Bills to commodities and petroleum goods. Why squeeze them even more? I believe that by paying indirect and direct taxes and paying for hiked prices, they have already been overtaxed, what more are they expected to cough up?
@Najum Avoid paying, Middle class don't have the choice to pay or not pay the taxes, they are deducted automatically from their salaries and icomes.
@Anon - It already has.
If IMF bail out does not come soon or China gives loans than it may be high inflation days in the offing for Pakistani population. Higher taxes is the only way forward for government with lot of hardships for people.
Again the salary class is going to suffer. too bad.
Do they have a vision of their own, or are they stuck with PML-N only?
It would be sinful to overburden the taxpayers once again rather than bringing Landlords and the elites of our country in the tax net. Just an example, a salaried individual who has to construct a house once in his life has to pay more tax than the person who's pay's property tax for his property in Islamabad. Similarly, rich landlords who earn huge amount of money through the agriculture should also be taxable and they should pay more as they do have various business as well. But the problem with our country is that those who do legislations come from these classes.
@Baseer Market forces work where there is rule of law and relitively small corruption at the lower tiers. Everyone fears the big arm of the law and acts and behaves with in the red line. In Pakistan, hibituated corruption has viped out all redlines, limites and taboos. In Pakistan, FBR is the mother of all corruptions, pay them half the amount owed in tax and a bit for their pocket, everything becomes above board, all singing and dancing. You are talking theory, but theory has got to be modified to accordence with ground realities.
So the PTI is planning on returning to the predatory taxation of the Ishaq Dar days? It is our duty pay tax but taxes should be fair. Instead of crushing the salaried class again why are the super rich businessmen and landlords not being taxed? Nowadays educated professionals have many options: Europe, the USA, Japan and Singapore. How will Imran Khan build a new Pakistan when all the country's professional classes have fled?
well cut short i have a family in order to meet my bread and butter requirements and improve life i will start a business, so in a way gov of pakistan should start business and earn,make organisations profitable to increase earning ask local people to invest
@saleem without a sound economy security is vulnerable how much you spend on it.
In India there is a new way of giving benefits to poor. Government of India is encouraging everyone to open bank accounts and the benefits are directly credited in to their accounts in order to avoid middle men to pocket the money
Cut defense budget
@Shazad There is no point in comparing defence budgets of India and Pakistan. India is 5 times bigger than Pakistan in size, therefore it is quite natural for it to have a similar size of the defence budget. Apart from that, Indian economy is growing at 8+% per annum so it can very well afford a large defence budget which Pakistan cannot with its current economic conditions.
Mr. Imran Khan had clearly and again and again promised before elections that the people must vote for him because he would increase government's income not by increasing taxes but by eradicating corruption from bureaucracy and other powerful ranks. He was right then, but now that he is in the seat he seems to be going back on his promise. He was right then because most of the people's money is engulfed by the employees of the government corporations such as those of electricity, gas, PIA, Steel mill, railways, along with departments like NADRA, Passports offices, GST and import duty collectors, and the list is endless. Instead of raising taxes it would be very helpful to the country to reduce these losses by privatizing all government corporations on private-public participation and to enforce a stricter oversight of the officials of the collector departments. But it seems the IMF is again at our throats making it impossible to correct our corrupt infrastructure.
Why does every government want to hit the already hard hit salaried employees? Get taxes out of the Ministers and Senators who hardly pay any taxes and hide their earnings. Audit each and every Minister and Senator and members of parliaments and subject them also to paying their share of income tax. Why are they being exempted. Civilians are already hit by the high rise in rates by K-electric in Sindh which keeps on increasing the electricity rates every few months. All prices of commodities are also on the increase and the Salaried class are the WORST HIT. The so called bureaucrats are enjoying themselves while the masses suffer under the burden of heavy taxes
Salaried individuals over the age of 60 get a 50% rebate in their income tax but with a maximum limit of Rs.1,000,000/- total income. This limit was put into effect decades ago and there has been no change in that. This limit should be increased to at least Rs.4,000,000/- and any salaried individual over the age of 65 years having a total income of upt Rs.4,000,000/- should get he benefit of a 50% reduction in his income tax taking into consideration that he has been paying heavy taxes throughout his working life
It's not a welfare state ...instead state run on welfare PTI has failed to live upto expectations..
It was an unwise decision by the previous government, and how the social brunt is to be faced by the current government. It has to be revised at any point in time as it was totally unrealistic. I my self is a salaried person and the tax I give now is very low compared to my salary which is not injustice to the state. hope our tax many will be used wisely.
Awhat about corruption income for corrupted govt servants
Very correct proposal to increase tax participants and rollback ex govt decision to shrink tax payer.
@A shahid welfare run on tax
It’s a pity that only 1.4 million tax filers in a country of 200 million people.
@SPEETAMAN A. ARJANI "Why does every government want to hit the already hard hit salaried employees? " They are the only one cannot hit back.
@Shazad , i know a lot how defence budget is wasted as there is no accountability! Just count the number of latest model parados and cars with defence organizations and too for office use and not field use. How they contribute to defence capability ! This wastage is just the tip of iceburg!
Salaried Class - the sitting duck The much needed respite that we the salary tax payers of Pakistan got in the last budget * is planned to be drastically reduced (though final details are not available). I would like to draw the attention of the Finance Minister that before you go ahead with whatever plans you have on this matter please do consider (a) contribution of salaried tax payer to the national exchequer is not high but the impact for us is, (b) the middle class is overburdened with whole array of indirect taxes, high cost of housing and utilities, exorbitant school and university fees, rising cost of medical expenses, and the list goes on. Rationalization of tax structure is fine and we are willing to pay our due share in the growth of naya Pakistan but drastic recall is unwarranted. Please note that there are other areas of priorities, certain sector of economy, like agriculture (though provincial subject) are not even in the tax umbrella, tax evaders those who never pay taxes (based on data that is available with FBR, tax money should be recovered from them immediately), untaxed perks enjoyed by the senior government officials, and last but not least, the overdue reforms in FBR itself whereby making it more effective and corruption free. Government should focus on them and not take on the easy route first. The salaried class, like other segments of society, is extremely hopeful that under PTI leadership things would finally change for the best and want to pay its due role in the development of our beloved country but, unfortunately, our desire is also financially constrained.
Hope your considerate government will consider our point of view too. * Note the total income tax relief in the budget is Rs. 100 bn, which is just around 2% of the total tax collection figure of 2017.
Every business no matter how small or big should get a tax id and file their taxes every year. Look at the properties owned by these business people. Salaried person ever if is making Rs.2 lakh per month can not compared with a small shop keeper who makes more than Rs.2 lakh and pay ZERO taxes.
Those numbers are crazy, no wonder our government is always looking for a loan and can never get enough reverie from tax collections. Did I read it right? If you made between Rs 400.000 to Rs 800,000, you paid no taxes? And the new government is purposing Rs 1000 for those incomes?
Please revise the Tax form . It is nearly impossible for a common man to file. Just look at USA/Canada IT forms and copy them. The form should be very simple for common filers who do not have shares or stocks/bonds. Income tax should also be imposed according to the propert that a person holds.
Lower salary earners need this break to improve their standard of living. government should focus on the big fish to bring back equilibrium in wealth distribution.