Govt mulls tax measures with long-term political implications

Published June 27, 2021
A major thorny issue revolves around the power given to assistant commissioner income tax for arresting tax evaders. — Illustration by Khalida Haq/File
A major thorny issue revolves around the power given to assistant commissioner income tax for arresting tax evaders. — Illustration by Khalida Haq/File

ISLAMABAD: The government is evaluating the economic and political implications of some tax proposals which are still under consideration despite the fact that Finance Minister Shaukat Tarin delivered a long speech on the Budget 2021-22 in the National Assembly.

Mr Tarin on Friday informed the parliament that all those tax measures were withdrawn which were inflationary in nature besides restoration of exemptions on medical allowance, GP fund, subsidised food and newspaper employees travel allowance.

Well-paced sources told Dawn that some tax proposals being debated at a highest level and input from Prime Minister Imran Khan is being sought before making these measures part of the proposed amendments. “We will present the amended Bill in the parliament on Tuesday,” Special Assistant to Prime Minister on Finance and Revenue Dr Waqar Masood Khan told Dawn.

Mr Khan said that most of the amendments had been finalised.

A major thorny issue revolves around the power given to assistant commissioner income tax for arresting tax evaders. Interestingly, these powers already available under the sales tax and customs Acts to tax officials.

The implication of this power is very high in income tax as it is believed that 10-20 million tax evaders exist in Pakistan. The Federal Board of Revenue (FBR) has recently confirmed about having details of over 7m tax evaders in the country.

Mr Tarin in his speech said a committee, led by the finance minister, will decide on the arrest of tax evaders. However, officials said the issue is still under discussion and will be sorted out soon. “We may finalise this and other issues by June 27,” sources said.

FBR Chairman Asim Ahmed was approached on WhatsApp but he did not reply to messages.

Yet another issue is the reversing of withholding tax exemptions on banking transactions. “This issue is under consideration for restoring tax on banking transactions,” the sources said, adding that the government has already given up tax collection on food-related items.

“The FBR needs tax collection as well,” a source said, adding that the revenue body collects more than Rs22 billion withholding tax on banking transactions. However, the source said it has not been yet finalised whether to forgo the tax or restore it to the pre-budget status.

Similarly, the tax on phone calls is also under consideration. In a proposal submitted to special cabinet meeting, the FBR projected an increase of Rs70bn under the Federal Excise Duty (FED) from telecom sector. It was proposed that FED on mobile phone calls and SMS at the rate of Re1 per call (call exceeding three minutes) and Re0.10 per SMS. Similarly, it was proposed to levy FED on internet data usage at the rate of Rs5 per GB.

Due to public pressure, the government had withdrawn the proposed levy on SMS and internet. However, the rate of FED has been lowered to 70 paisa call exceed five minutes instead of Re1 per call (call exceeding three minutes).

It has been proposed to charge 15 per cent income tax on profit from investment in government securities by the non-bank financial institutions. It is believed that this decision will attract huge investments in government securities.

Published in Dawn, June 27th, 2021

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