PM signs off on Rs110b new tax measures. ILLUSTRATION: JAMAL KHURSHID
Prime Minister Nawaz Sharif gave his approval to introducing around Rs110 billion new income tax measures for the next financial year including levying 10% withholding tax on air tickets of first and business class international passengers.
The proposal was cleared by the premier during a marathon meeting, held to review income tax measures for the financial year 2014-15. Finance Minister Ishaq Dar suggested about Rs130 billion income tax measures but the premier refused to accept those which could cause agitation after the announcement of the budget, according to sources in the Ministry of Finance.
The Rs110 billion is a conservative figure, as the actual impact of these tax measures could be far higher than this amount, said sources. They added that the premier turned down the proposals that had direct bearing on the masses.
The sources informed this correspondent that as the premier rejected significant number of proposals, the Federal Board of Revenue (FBR) may face difficulties in achieving next year’s tax target of Rs2.810 trillion.
In a move to capture the expenditures of the wealthy class, the government has proposed to introduce withholding tax rates on first class and business class air passengers. For the compliant taxpayers, the rate could be 5% while for those who are not tax compliant the rate could be 10%, said the sources. They added that the withholding tax will be adjustable for those who file annual income tax returns.
The estimated income from this proposal is Rs5 billion to Rs6 billion that has been worked out on the basis of the money spent on buying international air tickets by passengers falling in these two categories. In the last fiscal year, an amount of Rs60 billion was spent on buying first class and business class air tickets.
Sources said that a law will be passed to implement two separate rates and the airlines will be having access to the data of compliant taxpayers. The sources said that the government may also increase the federal excise duty rates on air tickets for international travelers.
Tax on professionals
According to another proposal, the government may also increase income tax rates for professionals from 6% to 10%, according to the sources in the Ministry of Finance. The services sold by chartered accountants, lawyers, doctors, dentists, architects, engineers and interior decorators are treated as professional services.
However, the Federal Board of Revenue is facing difficulties in collecting taxes, particularly from lawyers and doctors as no foolproof mechanisms exist where the incomes of these people could be judged. The FBR is implementing a Universal Self Assessment Scheme under which whatever is declared by the taxpayer is treated as final until his case is picked for audit.
Due to compliance issues, the FBR was facing problems in enhancing the tax base. This year only 76,536 business people filed wealth statement. Under the law, those who own more than Rs1 million assets are liable to file wealth statement. This figure was comparatively better in case of salaried class, as 121,087 people filed wealth statements.
The sources said due to difficulties in capturing the real income of the people, the government would rely this year to capture the expenditures - introducing withholding tax on international air travel was one of such measures. Last year, it had introduced 5% withholding tax on student fees of over Rs200,000 per annum.
Published in The Express Tribune, May 30th, 2014.
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COMMENTS (10)
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This circus of taxation is a ploy to provide for the luxury of chosen few. It is not different in other countries, even US. Working class faces grinding + nut cracking in every part of the world. We get to elect our molesters. That why its called democracy.
This looks like window dressing in order to satisfy some donor country........curb the corruption in the CBR if results are required.
easy way out - instead of plugging the leakages, increase the tax rates to cover for the inefficient, corrput and impotent GOP machinery !
Taxing the nation and missing administrative relief !
Again, either ignorant of the facts or deliberately hiding the truth from the public. Just think for a moment - can people from an underdeveloped country like Pakistan spend Rs 6bn worth of tickets in business and first class!! Most of these business and first class tickets are for Emirates airlines and are purchased by the well off UAE nationals. You see Emirates Airlines provides tickets for long haul flights originating in Pakistan at a high discount. So these nationals send foreign currency to Pakistan and buy the tickets here. So it is a double edged sword, increase taxes somewhat but drive away this critical source of foreign exchange.
Of course the shopkeepers, traders, property dealers, large agriculturists, manufacturers (the real tax choors but PML-N voters) will never be taxed. Same old mantra of squeezing more from the ones who already pay will go on as that suits the ruling class. A simple formula of deemed income deriving from electricity and phone bills could easily do the job but then the likes of Sharif family will also have to pay real income tax
FBR officers have become lazy.Most of them did not file their own return of income (1090 out 1503).So how can these officers collect taxes.What moral authority they have to issue notices to others to file tax returns?.
FBR should deploy 50% of their work force to broaden the tax base.
Taxing Business class travel and increasing the rate of tax deduction on lawyers/doctors is a very lazy way to collect tax.
They will never tax the higher class. They will just increase the tax rate for teh salaried class because they are the only people in Pakistan who are paying tax honestly. The people of the middle and lower middle class who voted for NS especially in Punjab will have to pay for it.
Why don't Mr. Ishaq start from members of NS family, from himself and from members of Parliament. They have no right to tax people of Pakistan until a single MNA or MPA is left who is not filing his tax returns.
The best and fairest tax is a user tax. The tax on high priced airline seats is a user tax and thus acceptable and fair. A country's total wealth is made up of the goods and services it produces; those who produce goods and services should be encouraged to produce more by allowing them to accumulate their wealth and plough it back to increase the quality and quantity. This is a rational and fair way of thinking and if the incumbents follow this route, the response has to be positive. The current thinking has forced people to emigrate. Please ponder.
Instead of capturing the income govt is going in the opposite direction. Doctors will pass on the tax increase to poor public. Simplify the procedures. Govt already got NADRA and they can really benefit from this database if it is serious in bringing reforms.
Rich class should pay the tax but data protection should be the first priority. Air travel is cheap in other countries but Govt is bent upon increasing it. This will affect the airlines. Remember PIA is being considered to for privatization. Have they analysed tax impact on this issue?