Government reflects on tax measures with long-term policy implications – Journal


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

Mr. Tarin informed Parliament on Friday that all these inflationary tax measures had been removed, in addition to the reinstatement of exemptions on medical allowances, the general fund, subsidized food and travel allowances for newspaper employees.

Well-paced sources told Dawn that some tax proposals were being debated at the highest level and that Prime Minister Imran Khan’s input was sought before incorporating these measures into the proposed amendments. “We will present the amended bill to parliament on Tuesday,” Special Assistant to the Prime Minister for Finance and Revenue, Dr Waqar Masood Khan, told Dawn.

Mr Khan said most of the amendments had been finalized.

A major thorny issue revolves around the power given to the Assistant Income Tax Commissioner to stop tax evaders. Interestingly, these powers are already available under sales tax and customs laws for tax officials.

The implication of this power is very high in income tax as it is believed that there are 10-20 million tax evaders in Pakistan. The Federal Board of Revenue (FBR) recently confirmed it has details of more than 7 million tax evaders in the country.

Mr Tarin said in his speech that a committee, headed by the finance minister, would decide on the arrest of tax evaders. However, officials said the issue was still under discussion and would be resolved soon. “We could finalize this problem and others by June 27,” sources said.

FBR chairman Asim Ahmed was approached on WhatsApp but did not respond to messages.

Yet another problem is the cancellation of withholding tax exemptions on banking transactions. “This issue is being considered to reinstate the tax on banking transactions,” the sources said, adding that the government had already waived the levying of taxes on food products.

“The RBF also needs tax collection,” a source said, adding that the tax administration collects more than Rs 22 billion in withholding tax on banking transactions. However, the source said it has not yet been decided whether to drop the tax or restore it to pre-budget.

Likewise, the tax on telephone calls is also under consideration. In a proposal submitted to a special cabinet meeting, the RBF provided for a Rs 70 billion increase in federal excise tax (FED) for the telecommunications sector. FED was offered on mobile calls and SMS at the rate of Re1 per call (call greater than three minutes) and Re0.10 per SMS. Likewise, it has been proposed to charge FED on internet data usage at the rate of Rs 5 per GB.

Due to public pressure, the government had withdrawn the proposed tax on texting and internet. However, the FED rate was lowered to 70 paisa per call exceeding five minutes instead of Re1 per call (call exceeding three minutes).

It has been proposed to levy an income tax of 15 percent on profits from investments in government securities by non-bank financial institutions. It is believed that this move will attract huge investments in government securities.

Posted in Dawn, le 27 June 2021


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