• Opposes raising taxes on stationery, hospital equipment
• Shibli Faraz denounces additional taxes on salaried class

ISLAMABAD: The Senate Stand­ing Committee on Finance continued its deliberations on the Finance Bill 2024 on Friday, with a focus on recommending to the government a reduction in the proposed increase in sales tax rates on various items, including stationery and hospital equipment.

A meeting of the committee, presided over by Senator Saleem Mandviwalla, also questioned the logic behind bringing exporters under the standard tax regime while increasing the tax rate on retailers from 15 per cent to 18pc, particularly those selling branded garments.

PTI’s Shibli Faraz and independent Senator Faisal Vawda continued their debate on income tax measures, though the agenda for Friday’s meeting was changes in sales tax outlined in the Finance Bill.

Mr Faraz voiced his concern about the difficulties being faced by law-abiding citizens, highlighting their struggles. “We have established our own path and granted legal status to individuals who do not file tax retu­r­­ns,” he said, emphasising that the con­­­cept of filers and non-filers is flawed.

The PTI senator vehemently criticised the government for imposing additional taxes on the salaried class, questioning whether they would be forced to resort to illegal means to pay their taxes, highlighting the unfair burden placed upon them.

Mr Vawda expressed concern over the Federal Board of Revenue’s decision to exempt non-filers from taxes for traveling to Haj and Umrah, asking FBR officials to explain the reasons for these exemptions.

Sales tax rates

At the outset, committee members expressed their opposition to an increase in sales tax rates on stationery items and hospital equipment. It was suggested that the rate be lowered for charitable institutions importing medical equipment for hospitals. The committee recommended that government hospitals should also be granted tax exemption on imported equipment.

Exporters’ representatives infor­med the committee that the government has made a change in the tax regime for exporters. Previously, the exporters were subject to a fixed tax on their turnover, but now they are included in the normal tax regime.

The exporters have strongly advocated for the continuation of the fixed tax on turnover for exporters.

Dr Khurram Tariq, the president of Faisalabad Chamber of Commerce and Industry, proposed measures to prevent duplicate deductions at source and alleviate liquidity challenges in the export industry.

He recommended avoiding an additional 1pc advance tax and transitioning all entities from the final tax regime to the normal tax regime without conditions. However, these proposals were not endorsed by the FBR policy members.

POS system

The representatives of retailers expressed their willingness to pay taxes through the point-of-sale (POS) system. The rate for POS retailers has been increased from 15pc to 18pc. The retailers suggested that the government focus on expanding the tax base, rather than raising tax rates.

The FBR member IR Policy said 18pc sales tax has been imposed on big brands.

Pakistan Retail Business Council (PRBC) officials raised concerns about taxation reforms, highlighting that compliant retailers face disproportionately higher effective tax rates compared to non-compliant counterparts.

They recommended maintaining the sales tax rate for POS-connected retailers at 15pc, citing losses in market share to the undocumented sector and store closures following recent tax increases.

The committee recommended regular dialogues with the FBR to address retail sector’s concerns and proposed enhancing human resour­ces within the sector for improved efficiency.

Tax on teachers

Representatives from Beacon­house National University presented a proposal to eliminate a 25pc tax rebate on salary income for teachers. They argued that retaining this rebate would lead to a 30pc increase in tax liability for full-time faculty.

They further noted that, cumulatively, these policies could result in a three- to five-fold rise in tax payments for university faculty compared to other salaried professionals earning similar incomes.

The Pakistan National Heart Association advocated for a tax increase on sugary drinks.

The association warned that if immediate action is not taken, the number of diabetic patients will rise to 6.2m by 2045.

The All Pakistan Fertiliser Dealers Association updated the committee on the changes to fertiliser dealers’ tax structures. The group is dissatisfied with the 0.5pc increase in sales tax for dealers.

An FBR official pointed out that the tax increase on fertiliser dealers is for supply chain documentation.

Published in Dawn, June 22nd, 2024

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