Revision: A Super Tax for the super wealthy

Senate standing committee says income threshold should be lowered for high earners

ISLAMABAD:

A parliamentary committee has sought expansion in the net of Super Tax, levied to collect funds for Operation Zarb-e-Azb, from people earning Rs300 million annually besides seeking withdrawal of income tax exemptions granted to people dealing in the business of imported Liquefied Natural Gas (LNG).

The Senate Standing Committee on Finance and Revenue suggested the government ought to lower the annual income threshold for charging Super Tax from Rs500 million to Rs300 million. In a meeting held on Friday, the committee said the government’s decision to fix a higher income threshold has excluded majority of the wealthy class from the levy.



In the budget 2015-16, the federal government has proposed a 4%, one-time, super tax on banking companies and 3% on individuals and other companies having an annual income of Rs500 million. It has estimated earning Rs22 billion from the levy. The proposal to lower the threshold was moved by Pakistan Peoples Party Parliamentarians (PPPP).

The government has estimated the cost of rehabilitation of Internally Displaced Persons and security enhancement at over Rs180 billion. It has allocated Rs100 billion in the budget including Rs55 billion given for rehabilitation of TDPs.

While addressing the post-budget press conference, Finance Minister Ishaq Dar had said that only 190 individuals and companies were earning more than Rs500 million annually. He said out of those, 155 are companies while the individuals were less than five.

He said at the threshold of Rs200 million, an additional Rs3 billion would be generated, therefore, the government had decided to keep it limited to a select bunch.

Headed by Senator Saleem Mandviwalla, the standing committee also recommended to the government that the income tax exemption granted to LNG terminals may be withdrawn. “I smell a rat in LNG deals and people involved in this business are making huge profits,” said Senator Taj Haider of PPPP.

“The incumbent government thinks that the way to prosperity and development is excluding oligarchies from taxation,” added Senator Haider while criticising the government for the move.

He said the wealthy class uses such exemptions to whiten their black money.

Hussain Dawood’s Engro Group has set up a LNG plant under the 2010-11 LNG Policy that gives blanket tax exemptions on import of LNG. The Economic Coordination Committee of the Cabinet has also reduced the Sales Tax rate for LNG used in fertiliser plants from standard 17% to 5%.

The standing committee also recommended the government to reduce GST rate on petroleum products to 15% aimed at lowering the increased burden on consumers. The members were of the view that production could not pick up in the country despite a steep decline in petroleum products prices in the international market.

The PPPP Senators accused the federal government of violating the constitution by claiming right on provincial cash surpluses. In the new budget, the federal government has shown Rs297 billion provincial surpluses to restrict the overall budget deficit to 4.3% of Gross Domestic Product.

The Finance Ministry is making delayed payments to the Sindh government to show its cash surpluses, which have created serious problems for the provincial government, said Senator Haider. He said the provincial government was deferring payments to the next fiscal year due to shortage of funds.

Senator Haider said the federal government was taking decision on matters that are having implications for the provincial government in ECC instead of bringing these to the Council of Common Interests. He said the federal government was also charging 5% collection fee on Zakat, which is collected in the provinces.

However, Finance Secretary Dr Waqar Masood said the federal government was not retaining provincial funds and the money is timely distributed to all the federating units.

The committee also warned the government about the brewing petrol crisis in the country. The government is in a denial mode and the country is again heading for a petrol crisis, warned Mandviwalla, the chairman of the committee.

However, the additional secretary petroleum claimed that there was no shortage of fuel and people were reacting in panic.

Published in The Express Tribune, June 13^th,  2015.

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