35% tax on monthly income of over Rs500,000

Govt increases tax burden on people, gives more benefits to lawmakers

ISLAMABAD:

The president of Pakistan has approved amendments to the Members of Parliament Act to increase their perks by allowing the chairpersons of standing committees to use up to 1,600cc cars anywhere in Pakistan and also exonerated them from any damages caused to the public vehicles.

The president on Monday gave his assent to the Finance Act 2023, a piece of legislation that should have only been used to amend tax laws but was made a tool to amend at least three other Acts of parliament.

At a time when the government gives more monetary benefits to the legislators, it has put an additional tax burden on the people.

The tax burden on the upper middle-income groups and the higher income groups has been disproportionately increased. The maximum tax rate of 35% will now be charged on the monthly income of over Rs500,000 as against the earlier level of over Rs1 million.

Through the Finance Act, the government has amended the Petroleum Products (Petroleum Levy) Ordinance, Members of Parliament (Salaries and Allowances) Act and Public Finance Management Act. Now, the petroleum levy can be increased to Rs60 per litre.

Some of these changes are being made to meet conditions of the International Monetary Fund (IMF) for the ninth review of its loan programme.

Through an amendment to Section 13A, the government has allowed the chairpersons of standing committees of the National Assembly and the Senate to use 1,200cc to 1,600cc cars. They are currently allowed to use 1,300cc cars.

It seems that the word 1,200cc has been added just to deflect criticism, as there is no locally made 1,200cc car, and the purpose is to use 1,600cc cars. A 1,600cc car now costs more than Rs7 million.

Through other amendments, the government has extended the facility of staff-driven cars to the heads of standing committees for their journey outside of Islamabad. Currently, they are required to hire private drivers in case of movement outside of the capital in an official vehicle. The government will pay for the remuneration of drivers.

According to the old law, the chairpersons were responsible “for the restitution of any damage caused to the official car in the event of any accident that occurs during journey outside Islamabad”. Now, this condition has been deleted and the exchequer will pay for the damage.

Through another amendment, the government has brought changes in the Public Finance Management Act.

It has now set May 10 as the new deadline for the Budget Strategy Paper, which appears realistic compared to the current deadline of April 15. It has also relaxed the conditions related to appointing the chief internal auditor and chief finance officers.

The government has set a two-year deadline for enacting a new legal framework for the pay, allowances and retirement benefits of state employees. It will establish a pension fund by the end of financial year 2023-24 to help discharge liabilities of the existing pension scheme and the new contributory pension scheme.

The Finance Division, with the approval of the government, may introduce a contributory pension scheme for the new employees entering government service from a date approved by the federal government, according to another amendment.

Income tax law

The government has made the deemed income tax regime stringent by linking the sale and transfer of properties with payment of 5% deemed income tax. It has also linked the exemption from the deemed income tax for certain properties with a person’s status as an active taxpayer.

Now, every capital asset of a non-filer will be subject to 5% income tax, irrespective of the value of the asset.

Former Federal Board of Revenue (FBR) chairman Syed Shabbar Zaidi commented that linking the transfer of immovable property with the payment of deemed income tax “is a very appropriate prescription”.

A lot of properties are held by persons who do not appear in the active taxpayers list or are eligible to exemptions provided in the law. The condition that there will be no transfer without discharging this liability is a good step, he added.

A new advance tax has been introduced for the construction, development and disposal of commercial and residential business. This advance tax will be collected on a project-to-project basis.

Through an amendment to the Customs Act, the government has waived duties on the import of household goods for the employees of Reko Diq Mining Company (Private) Limited.

The exemption will be given to only those employees who are either citizens of a country other than Pakistan or who for the tax year immediately prior to the import of goods were non-resident Pakistanis.

The government has also made changes in the sales tax law, primarily increasing the tax rate. The additional sales tax on supplies has been increased to 4% for non-registered persons. Effectively, the total sales tax will now be 22% for a majority of businessmen.

The government has imposed 5% tax on the sale of DAP fertiliser.

 

Published in The Express Tribune, June 27^th, 2023.

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