Car tax

August 11, 2019


THERE are no marks for guessing who has the toughest job in Pakistan right now. Few would come close to competing with the person tasked with collecting Rs5.5tr in taxes during the present financial year. The job is well nigh impossible at a time when economic growth is projected to slow down to 2.4pc from over 5pc in the last fiscal year. So we can see why FBR chairman Shabbar Zaidi is desperately tapping every opportunity that comes his way to net revenues to achieve his target, which is around 35pc higher than the tax collected last year. Now, taking advantage of the lifetime token tax collection by Punjab, Sindh and Islamabad on the small cars with engine size of up to 1000cc, according to a report published in this newspaper, the tax authority has decided to also recover lifetime (advance or withholding) income tax from their owners. This means that the car owners on the active taxpayers’ list who are already required to pay Rs10,000 as lifetime token tax will also have to deposit an equal amount to discharge their lifetime advance tax liability at the time of registration of their vehicles. (The advance tax liability will decrease at the time of renewal of registration according to the age of the car though.) Those who do not file their tax returns will have to make a further payment of Rs10,000. The decision is effective from July 1, 2019, and payment of advance tax will be mandatory, thus adding to the burden on the pockets of car buyers with limited, fixed incomes.

Desperate times require desperate measures. But will such revenue generation actions help the FBR achieve its ambitious target? Although the FBR was successful in collecting around 95pc of the tax revenue target for July, the first month of the present financial year, and increasing the number of tax return filers by 67pc to 2.5m last year, few believe that the board will be able to achieve or even come close to its target for the entire year in a shrinking economy. In reality, certain new tax measures and increased rates of indirect taxes will only further dampen the prevalent negative consumer and business confidence. Taxation should not be just about collection of higher revenues. It must also spur economic growth. Only by growing the economy can the government and the FBR achieve their revenue targets.

Published in Dawn, August 11th, 2019