• Scheme to be reflected in amended finance bill
• Real estate brokers, car dealers, restaurants, salons, doctors, engineers, lawyers, CAs to be charged fixed tax
• Imran says super tax to ruin his govt’s efforts for economy, increase inflation and unemployment
ISLAMABAD: The coalition government has decided to introduce another fixed income tax scheme for small builders and other service providers through an amended Finance Bill 2022.
The details of this scheme will be worked out later due to shortage of time for implementation, but it will be on the lines of the fixed scheme for small shopkeepers, a tax official told Dawn on Saturday.
The proposed plan for small builders will comprise three categories. The first category will cover Karachi, Islamabad and Lahore for which a higher rate of Rs1,000 per square foot has been proposed. The second tier consists of Peshawar, Rawalpindi, Abbottabad, Sahiwal, Multan, Gujranwala and Faisalabad that will be charged a lower rate of Rs300 per square foot, while the third category will have the remaining cities with a further lower rate of Rs150 per square foot. These rates would be finalised after consultation with the finance minister.
A small builder has been defined as someone with four residential plots and two commercial plots for building in a year. It was observed that builders constructed houses for sale but they did not come under the tax net. Six kinds of rates will be proposed in two groups for each category.
The Federal Board of Revenue will notify the payment method for the builders, according to a tax official.
Moreover, the government may introduce fixed tax rates ranging between Rs20,000 and Rs100,000 per annum depending on the nature of professional services and their potential. The sectors that could be brought under the fixed scheme are real estate brokers, car dealers, restaurants, salons and other professional services providers such as doctors, engineers, lawyers, chartered accountants. The scheme for both builders and service providers will be introduced in the Finance Bill 2022.
Meanwhile, former prime minister and Pakistan Tehreek-i-Insaf (PTI) chairman Imran Khan has slammed the coalition government for imposing the ‘super tax’, which he said will ruin all the efforts and gains made by his government to boost the economy.
However, the fixed tax regime will be implemented either in July or August, a senior tax official confirmed to Dawn. When asked about the revenue potential of the proposed scheme, he said it hadn’t been calculated yet, as the scheme was aimed at documenting the economy.
The previous PTI government had set Rs20,000 as fixed tax for small shopkeepers, which had now been reduced between Rs3,000 and Rs10,000. Similarly, a documentation mechanism proposed previously, making submission of a one-page return and registration with the board of revenue, had also been abolished.
Despite contributing 20 per cent to the gross domestic product, the retail sector’s contribution to the tax was just 0.25pc, and around 80-90pc of the retailers were not registered with the authorities.
Finance Minister Miftah Ismail also confirmed on Saturday that the government was working on a proposal to introduce a fixed tax regime for real estate brokers, builders, housing society developers, car dealers, restaurants and salons in the next few months. He further said small shopkeepers and jewellers had been brought into the tax net after consulting with their associations.
On June 10, the government had announced a new scheme under which a small shop owner would have to pay a fixed tax of Rs3,000 a month and big retailers Rs10,000. The retailers dealing in gold and having shops of 300 square feet or less would have to pay a fixed income and sales tax of Rs40,000. For bigger shops, the sales tax had been reduced from 17pc to 3pc.
There were around nine million retail shops in Pakistan and the government wanted to bring 2.5 to three million of them into the tax net.
‘Common people crushed financially’
Meanwhile, PTI chairman Khan on Saturday said the 10pc ‘super tax’, imposed by the government on 13 major large-scale industries, will ruin all the efforts and gains made by his government to boost the economy and unleash a flood of inflation and unemployment in Pakistan.
He also warned that owing to the amendments to the National Accountability Bureau (NAB) law, Pakistan could become a failed state.
“It has been proved that they (the coalition government) were not ready and had no plan. They only wanted to get an NRO (relief in corruption cases) for the second time,” he said while speaking at a news conference.
Mr Khan said a provisional budget was being announced for the first time in the country’s history, as it was never heard of before.
“Now, petroleum levy is being imposed due to which prices of petrol will increase further and the common man suffer more. Secondly, they are imposing a ‘super tax’ that will amplify the overall tax to 39pc and make our products incomparable with those from India and other countries,” he maintained.
The former premier remarked that industries will suffer due to the super tax and unemployment rise consequently.
“The stock market has already shown the effects of the super tax. The agriculture sector will also be affected as prices of diesel will increase. Earlier, the salaried class, earning up to Rs100,000 per month was exempted from income tax, but now that limit has been reduced to Rs50,000,” he claimed.
Mr Khan further said he had challenged the amendments to the NAB law in the Supreme Court. The rulers had buried accountability to save themselves.
Moreover, PTI Central Information Secretary Farrukh Habib, in a statement, said the “imported government” had proved disastrous for the country, taking the economy on the brink of a collapse in only 75 days.
He also hoped the Supreme Court would declare the NAB amendments null and void.
Published in Dawn, June 26th, 2022