ISLAMABAD, June 12: Taxation proposals in the budget appear to have been dictated by political considerations.

The focus of tax proposals is to facilitate industrialists – one of the PML-N’s key support groups – rather than ordinary citizens. For instance, the increase in the rate of sales tax from 16 to 17 per cent will affect the poor the most because it will fuel inflation.

The budget proposes to raise Rs209 billion through new taxes – direct and indirect. The government is expected to realise an additional amount of Rs63.5bn through sales tax, Rs18.5bn through federal excise duty (FED), Rs1bn through customs duty and Rs35bn through administrative measures such as plugging loopholes in income tax and sales tax.

People in the low-income group will be hit by the measures the most.

Most of income tax revenue measures worth Rs83bn are proposed in an effort to help documentation. A relief of more than Rs3bn in income tax has been given mostly to industrialists.

The government hopes these measures will help achieve next year’s revenue target of Rs2,475bn. The revenue target for 20012-13 was Rs2,007bn. A 0.5pc Income Support levy on movable assets such as cash, gold and cars has been introduced to raise Rs6bn.

Revenue measuresAn increase has been envisaged in the number of slabs for salaried persons to 12 from six. The tax rate on those whose annual salary exceeds Rs7 million has been raised.

The tax slabs on property income have been increased to six from three.

A withholding tax has been proposed at a rate of 10pc on the profit/mark-up/interest earned on transactions of margin financing, trading financing and lending.

The minimum tax is enhanced to 1pc from 0.5pc for companies, certain individuals and associations of persons in case of declared losses; a minimum tax proposed at a rate of Rs25 per sq ft of the constructed area sold and Rs50 per square yard of the area sold of the developed land by builders and developers.

Distributors, manufacturers or commercial importers will withhold 0.5pc withholding tax from retailers.

Tax on vehiclesThe rate of tax on registration of motor vehicles will be Rs7,500 on a vehicle of engine capacity up to 1000cc, Rs12,500 on 1001cc to 1199cc, Rs17,500 on 1200cc to 1299cc, Rs30,000 on 1300cc to 1599cc, Rs40,000 on 1600cc to 1999cc and 2000cc and above Rs80,000.

The proposed rate of tax on purchase of motor cars and jeeps is Rs10,000 up to 850cc, Rs20,000 on 851cc to 1000cc, Rs30,000 on 1001cc to 1300cc, Rs50,000 on 1301cc to 1600cc, Rs75,000 on 1601cc to 1800cc, Rs100,000 on 1801cc to 2000cc and Rs150,000 above 2000 cc.

The withholding tax on payment of prize money on prize bonds is enhanced to 15pc from 10pc and initial depreciation for companies’ plant and machinery is reduced to 25pc from 50pc.

The exemption limit for investment in national saving certificates is proposed to be withdrawn.Income tax exemptions to employees of airlines, teachers, researchers and university and educational institutions established for profit purposes are withdrawn.

Customs duty on betel nuts is increased from 15pc to 20 pc and betel leaves from Rs200/kg to Rs300/kg.

A tax at the rate of 2pc is imposed on taxable supplies for a person who has not obtained a sales tax registration number.

The sales tax exemption is withdrawn on milk preparations obtained by replacing one or more constituent of milk by another substance and supplies against international tender.

In addition to the existing 16pc, a 5pc sales tax is proposed on non-registered commercial and industrial consumers of electricity and gas having monthly bill in access of Rs15,000.

The FED on aerated beverages is increased from 6pc to 9pc. The rate of FED on cigarettes is enhanced.

The FED at the rate of 40 paisa per kg on imported seeds, Rs1 per kg on locally produced oil and 10pc ad valorem on motor vehicles of cylinder capacity of 1800cc or above is imposed.

The FED exemption on hydraulics, cement and services is withdrawn.

The number of items subject to sales tax at retail level is increased.

The concessions available to 13 districts of Khyber Pakhtunkhwa, Fata and Pata on the pattern of Income Tax exemptions are withdrawn.