Taxing the higher class
PM signs off on Rs110b new tax measures.
PM signs off on Rs110b new tax measures. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
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.
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.