• Proposals include ‘luxury tax’ on big houses, big vehicles • Tax on rental income under consideration • DC rates likely to be revised • Regulatory duty on items to be increased
ISLAMABAD: The coalition government is considering introducing a string of new tax measures in the upcoming budget to garner around Rs 300 billion in additional revenue in 2022-23 (FY 23) and allow the Federal Board of Revenue (FBR) to provide sectors and regions. Working on finalizing it. next two days, dawn It has been learned from official sources.
The new tax measures include a proposal for a ‘luxury income tax’, which would be a replica of the wealth tax to tax real estate, including large houses in posh areas, while also bringing owners of luxury vehicles under the purview of this tax. As part of a deal to revive the stalled International Monetary Fund Program (IMF).
The overarching directive from Prime Minister Shahbaz Sharif is to focus on direct taxation, especially taxing the income of the affluent. The proposal also includes increasing and effectively taxing rental income. There will be no title of luxury tax in the budget documents, but the spirit is to tax the rich. Sources said the government is planning to avoid levying taxes on sectors or products that may affect poor people.
The FBR tax proposals revolve around the principle of taxing the income of the wealthy from all sources in accordance with the Prime Minister’s instructions to budget makers. However, incentives will be offered to attract investment and ease of doing business.
In order to reduce the rising import bill, work has been started on identifying the luxury items to be included in the list of banned items started for a period of two months on 19 May. However, there is no confirmation from the Finance Ministry whether the list of banned items will be increased further. Chambers and industry representatives are already opposing this move of the government.
A senior finance ministry official confirmed dawn That the new measures will only cost around Rs 300 billion, which is 0.4 percent of GDP.
“I can’t tell you anything specific,” the official said, adding that the finance ministry is opposing the IMF’s demands to increase the tax burden on the salaried class. “We have already opposed it,” he said. He said that this demand was also opposed in the last meeting with the fund officials before the announcement of the next budget.
The boom in real estate in the last few years and parking of billions of rupees in real estate, especially due to the tax waiver scheme given to the construction sector by the previous government, has been on the taxation radar in the FY 2013 budget.
Sources said the proposed size of a house would be either 1,000 or above 1,500 square yards, adding up the size could vary and would require the final approval of the federal cabinet. Similarly, the engine capacity (CC) of luxury vehicles will also be decided in the next meeting. Other items under the purview of luxury tax can also be considered.
Another proposal is on the table to bring valuation of properties at par with market rates for the purpose of taxes. Another proposal is to make it mandatory for real estate societies to deposit withheld tax from buyers to the tax departments in real time.
Also, deputy collector rates for property valuation are still too low, and provinces will be asked to raise DC rates across Pakistan. “We expect a lot of revenue from this sector.
The previous government has also tried to increase the valuation table in 44 districts to bring it closer to the actual transaction of property. However, further growth in these tables is also on the cards, especially in Islamabad.
According to sources, among the proposals being considered are a proposal to increase the rates of regulatory duty on existing items of customs duty. At the same time, it is also proposed to identify new items which will be subject to regulatory duties.
According to sources, the purpose of this exercise is to increase revenue as well as cut the import bill.
At the same time, the Customs Department and the Ministry of Commerce are also working on identifying new luxury items, which can be included in the list of prohibited items to reduce the import bill. However, the proposal is in preliminary stage and may require approval of higher authorities.
On May 19, the government banned about 800 items, which is expected to save only $300 million per year. However, some officials of the industry and FBR have opposed the move as it has created problems for the local industrialists as some of the banned items in the list include raw material for industries. Interestingly, these banned items are being sold in the market.
The commerce ministry has already clarified that no restrictions will apply on raw materials, but industrialists claim they are facing problems.
There is another proposal suggesting working with oil marketing companies on a plan to reduce the consumption of petrol and diesel in the country instead of banning imports of a few million dollar products, which would lead to supply chain disruptions. Only. The oilfield import bill is expected to cross $20 billion by the end of June 30.
Published in Dawn, June 7, 2022