The government has proposed to collect Rs242 billion through enforcement measures in the upcoming budget in addition to expanding its list of potential additional taxes.
The development came as the International Monetary Fund (IMF) shows little flexibility on its demand over personal income tax measures.
Sources in the finance ministry told The Express Tribune that during last two days, Pakistan has shared its position on how it wants to achieve the Rs5.829 trillion tax target without taking additional revenue measures amounting to over Rs500 billion.
However, they said that the IMF was not fully convinced and pressed to take personal income tax-related measures in the budget.
“Increasing tax incidence on electricity bills of non-filers, exporters of the services, and taxing the mobile-related services were among a few proposals that have been revived after the IMF did not budge from its demands,” the sources said.
The economic team on Wednesday briefed Prime Minister Imran Khan about the IMF conditions, the sources said, adding the the Ministry of Finance remained tight-lipped about the meeting with the premier.
The sources said that Finance Minister Shaukat Tarin was still trying to avoid taking maximum taxation measures.
However, Special Assistant to Prime Minister on Finance Dr Waqar Masood is said to have opined that the government would have to take a few measures to keep the programme on track.
The finance minister is also inclined to the reduce capital gains tax rate on sale of shares at Pakistan Stock Exchange from 15% to 12%, said the sources.
The finance minister has vowed that he would achieve next fiscal year’s tax collection target of Rs5.829 trillion on the back of administrative and enforcement measures.
Pakistan had initially presented a list of Rs360 billion enforcement measures to the IMF, which it has now cut down to Rs242 billion.
The IMF has historically remained wary of the results of the enforcement measures which, according to the fund negotiators, do not yield any revenues.
The government has now assured the IMF that it would collect additional Rs160 billion at domestic taxes stage without resorting to additional taxes. Another Rs82 billion are assured to be collected on account of customs duties-related administrative measures.
The government has promised with the IMF that it would collect Rs30 billion on account of arrears stuck up at various stages while rationalising its earlier figure of Rs70 billion, said the sources.
It also hopes to collect Rs20 billion through audit and another Rs20 billion through enhanced monitoring of sales tax.
Similarly, the government has informed the IMF that it would collect Rs20 billion by installing track and trace system, also watering down its earlier wish of showing Rs50 billion under this head.
The sources said that collection of Rs50 billion has been shown under the head of integration of Point of Sales of the retail shops. The rest of the enforcement measures are related to monitoring of withholding taxes and court litigation.
In Customs, Pakistan has assured the IMF that it would generate Rs35 billion by curbing smuggling of tea, tyres textile and petroleum products. Similarly, the government has assured the IMF that it will collect Rs30 billion through curbing under invoicing of the imported goods. The rest of the amounts are expected to be generated through auction of confiscated goods and recovery of arrears.
The FBR also shared its plan with the IMF about repayment of refunds in the next fiscal year, which is one of the contentious areas. The member FBR Mohamad Asfhaq told the IMF that the FBR has issued recovery notices in cases where people had claimed undue refunds. However, he did not share details of litigation of such bogus or undue claims cases.
The sources said that the FBR has proposed to impose 1% minimum tax on exporters of services, on the pattern of the exporters of the goods, said the sources. The move, if approved by the Prime Minister, would generate about Rs8 billion in additional taxes in the next fiscal year.
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For an additional revenue of about Rs5 billion in next fiscal year, the FBR has proposed that 7.5% withholding tax may be imposed on those domestic electricity users who have monthly bill of Rs25,000 but are not filing their annual returns. The existing limit is Rs75,000.
Another Rs6 billion additional revenue can be generated by expanding the list of retailers and wholesale dealers who are subject to withholding taxes, the sources said.
The FBR was also looking into possibility of getting some additional revenues from use of data services, although according to a decision by the federal cabinet the FBR is supposed to reduce taxes on the telecom sector in the budget.
The advance income tax has to be cut from 12.5% to 10% in next financial year 2021-22 and to 8% in 2022-23. Similarly, the federal excise duty on telecom services has to be reduced from 17% to 16%.