No holding back: FBR notifies tax increase despite opposition

Will bridge the shortfall to pave the way for $518m IMF loan tranche.

ISLAMABAD: Despite stiff resistance by the opposition against what it calls “ultra-constitutional measures”, the federal government on Friday notified the increase in withholding tax, giving effect to the mini-budget that it imposed on the nation last week.

The Federal Board of Revenue (FBR) issued a Statutory Regulatory Order to give effect to up to 50% increase in withholding tax rates for those who do not file income tax returns. It has already notified the imposition of regulatory duty on furnace oil and 314 luxury items.

The government increased the withholding tax on the import of urea and fertiliser by industrial undertakings by 50% to 1.5% of the import value. It increased the tax on pulses from 3% to 4.5% for commercial importers and 2% to 3% for other importers of pulses.

The withholding tax on ship-breakers and imported ships has been increased from 4.5% to 6.5% and 5.5% to 8% respectively and on all kinds of other imports from 6% to 9%.

Leader of Opposition in the National Assembly, Syed Khursheed Shah, offered the government that the opposition would accept all the measures provided the government withdrew 5% regulatory duty on furnace oil and bring down the sales tax rate on petroleum products to 22% from 27%.

In the last three months, the government has introduced many mini-budgets aimed at raising Rs50 billion in taxes to cover the shortfall against the revised target of Rs2.691 trillion.

The FBR also gave effect to increase in withholding tax rates on all kinds of professionals including cricketers, lawyers and doctors. The withholding tax on contracts of sportsmen has been increased to 15% of the gross annual payable amount from 10%.

On services offered by companies, the tax rate has been increased by half to 12% and on services offered by individuals the new rate is 15%. The government will generate a minimum Rs7.5 billion through this measure.

The rates of withholding tax will remain unchanged for compliant taxpayers who file their returns regularly and their names appear on the Active Taxpayers List, said the government.

The decision was taken to honour an agreement with the International Monetary Fund (IMF) to raise a minimum Rs15 billion to bridge the shortfall against the downward revised tax collection target of Rs2.691 trillion. The move will pave the way for approval of the $518 million next loan tranche by the Executive Board of the IMF.

Published in The Express Tribune, February 14^th, 2015.

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