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ISLAMABAD: The government is in a fix to either heavily tax the salaried class under the amended Finance Bill, 2022 or to impose additional taxes of Rs140-150 billion on high-income earning sectors including tobacco, beverages, steel, and edible oil sectors through amendments to the proposed bill from July 1, 2022.

Sources told Business Recorder here on Tuesday that the Federal Board of Revenue (FBR) had committed to generating additional revenue of Rs125 billion from the salaried class under the Personal Income Tax (PIT) reforms.

However, the government provided tax relief of Rs47 billion to the salaried class in the budget (2022-23). Thus, the total amount comes to Rs172 billion. This amount has to be generated from other profit-earning sectors where taxes are not challenged in courts and ensure definitive collection of taxes in 2022-23.

However, the FBR has estimated to generate Rs28 billion from the banking sector, but no other proposal to impose additional taxes on other potential sectors, ie, steel, edible oil, tobacco, and beverages was incorporated in the budget (2022-23).

Sources claimed that the proposals to impose additional taxes on steel, edible oil, tobacco, and beverages were part of the Finance Bill, 2022 but dropped at the last moment. If the proposals to impose additional taxes on sectors earning “windfall profits” were incorporated in the Finance Bill, 2022, then the FBR was in a position to justify the tax relief of Rs47 billion to the salaried class.

Budget 2022-23: here are revised tax rates and slabs for the salaried income group

Sources said that the government is committed to continuing with tax relief provided to the salaried class due to higher inflation in the next fiscal year.

According to the sources, if the government maintains the current tax structure on the salaried class as proposed in the Finance Bill, 2022, the FBR has to again propose additional taxes on the high-income earning sectors. Through amendments in the Finance Bill 2022, the government may increase the incidence of taxes on the steel, edible oil, beverages, and tobacco sectors.

The proposal is to generate additional revenue of Rs50 billion from the tobacco sector. In Finance Bill, 2022, the FBR has proposed to raise the Federal Excise Duty on cigarettes to generate Rs30 billion.

Thus, the FBR’s estimated revenue from tobacco would now total at Rs80 billion in 2022-23.

Similarly, the FBR will propose additional taxes from the high-income earner sectors to generate the additional revenue of Rs140 to Rs150 billion and avoid additional taxation of the salaried class.

It is apprehended that the income tax proposed tax on deemed income of a non-productive immovable property to generate Rs30 billion and two percent Poverty Alleviation Tax on high earnings of all persons to raise revenue of Rs38 billion would be challenged in courts.

If this amount of Rs68 billion from these two income tax measures is challenged in courts, the revenue from these areas may not come. The FBR wanted to generate additional taxes which are definitely coming from the next fiscal year, officials added.

Through Finance Bill, 2022, the government has taken taxation measures of net Rs355 billion in the budget (2022-23).

Total taxation measures have been proposed at Rs440 billion for 2022-23.

The total relief measures stood at Rs85 billion.

The net impact of the measures stood at Rs355 billion.

Sales tax/federal excise measures amounted to Rs90 billion, whereas, sales tax relief totalled at Rs30 billion.

The net impact of the sales tax/federal excise measures stood at Rs60 billion.

The income tax measures have been projected at Rs316 billion, whereas relief has been provided of Rs49 billion. The net impact of the income tax measures totalled Rs267 billion. The FBR chairman said that the revenue from the administrative and enforcement measures has been estimated at Rs200 billion for 2022-23 as compared to Rs175 billion in 2021-22.

Copyright Business Recorder, 2022

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