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FBR may make changes in IT regime

May 06, 2012

Income tax officials were working on various proposals to bring all taxpayers into the normal tax regime and to do away with decades-old presumptive taxation. - File photo

ISLAMABAD: The Federal Board of Revenue is considering making nominal changes in the income tax regime to appease voters ahead of the general election.

An official privy to the budget-making exercise told Dawn that politics of an election year demanded that hopes for additional taxation should not be held too high.

On the income tax side, there would be no new taxation, but rather some relaxation, especially for the salaried class, the official said.

He said that unprecedented increase in energy prices and fuel were indirectly increasing the incidence of taxation on people.

“Every month, we have sufficient increase in revenue because of increase in the price of petroleum sector and electricity tariffs,” the official said.

“As a result there is little room for additional taxation in the last budget of the PPP-led coalition government,” the official said, adding that the government could not afford to either introduce new taxes or revise upward the rate of taxes because that will send a negative signal to voters.

However, the official said, income tax officials were working on various proposals to bring all taxpayers into the normal tax regime and to do away with decades-old presumptive taxation. As a result, the official said, presumptive tax rates would be increased so that such taxpayers could avail facilities in the normal taxation system but they would be linked with the regular filing of income tax returns.

In this regard, the official said, it had been proposed to increase the withholding tax of commercial importers from the existing five per cent to six per cent in the current presumptive tax regime. But to encourage them to come into the normal income tax regime, the minimum tax rate will be offered starting from three per cent from 2012-13. This will be reduced to two per cent in 2014-15 and one per cent in 2015-16, respectively. However, these people will have to file returns with the income tax department.

It is also under consideration to increase the withholding tax on services from the existing six per cent according to the potential and growth of the services.

At the same time, it has been proposed to increase tax rates of individual taxpayers from maximum 20 per cent to 35 per cent while reduce the rate for corporate sector from 35 per cent to 30 per cent in the next three years.

Aside from this, the budget makers are also considering bringing income tax on income from property under the normal regime. At the moment, tax officials are charging income tax on rents from property at fixed flat rates.

Under the proposed scheme, net income will be calculated after deduction of all costs, including repairs and other expenses etc, for levy of income tax.