Supertax: revenue impact estimated at Rs80bn

ISLAMABAD: The revenue impact of super tax imposed on big industries/sectors has been estimated at Rs80 billion for 2022-23 to generate additional revenue of Rs466 billion in the next fiscal year.

Sources told Business Recorder here on Friday that the amendments to the Finance Bill, 2022, continued till late Friday night.

The FBR’s net provisional tax collection reached Rs5,900 billion during 2021-22 against the budgetary target of Rs5,829 billion, reflecting an increase of Rs71 billion.

• FBR estimates to collect Rs80 billion from imposition of super tax

• 4% tax imposed on all sectors and 10 % levy slapped on 13 ‘high-earning’ sectors

• Government reversed Rs47 billion tax relief announced for salaried class and increased tax payments

• Income tax exemption limit has been reversed to Rs600,000 from Rs1.2 million

• Tax revision of salaries class with fetch Rs35 billion for FBR

• 2.5% tax is applicable on people earning Rs50,000-100,000 per month

• Income tax for people making Rs100,000-200,000 per month revised to Rs12.5%

• People making Rs200,000-300,000 per month will be charged Rs13,750 and 20% of amount exceeding Rs200,000

• Individuals earning Rs300,000-500,000 per month will be charged Rs33,750 and 25% of amount exceeding Rs500,000.

• People earning Rs500,000-1 million will be charged Rs83,750 and 32.5% of the amount exceeding Rs500,000

• People earning over Rs1 million per month will be charged Rs250,000 and 35% of amount exceeding Rs1 million

• 1-4% super tax imposed on high-income earners will fetch Rs120 billion in revenue

• 1% tax imposed on those earning up to Rs150 million per annum

• 2% tax slapped on those earning Rs200 million per year

• People making over Rs250 million per year will by 3% tax

• Individuals making over Rs300 million will be taxed at 4%

The total impact of the new measures taken through amendments to the Finance Bill, 2022, has been calculated at around Rs235 billion including reversal of tax relief for the salaried class.

The FBR has taken net taxation measures of Rs355 billion in the budget. Now additional taxation measures of Rs235 billion has been taken and net revenue measures now stand at Rs590 to Rs600 billion.

Moreover, the Rs47 billion tax reliefs announced in the budget for salaried class on June 10 was not only reversed but tax burden on salaried class was also considerably increased.

The tax exemption limit has been reversed to Rs600,000 from Rs1.2 million, while the fixed tax of Rs100 is replaced with a tax slab of 2.5 percent for salaried individuals who fall in the annual income bracket between Rs600,000 and Rs1.2 million.

The additional taxation measures through amendments to the Finance Bill, 2022 have been taken to achieve the enhanced revenue collection target of Rs7,470 billion for the next fiscal year.

The government has to generate an additional revenue of over Rs466 billion to achieve the revised revenue collection target of Rs7,470 billion for the next fiscal year.

One to four per cent “poverty alleviation tax” imposed on high-income earners would have a revenue impact of Rs120 billion. Under the amended Finance Bill 2022, one per cent tax is being imposed on the income of those earning up to Rs150 million per annum, two per cent on those earning Rs200 million, three per cent on those earning Rs250 million, and four per cent on those having annual income of over and above Rs300 million.

The FBR has estimated to collect Rs80 billion from imposition of four per cent “super tax” on all sectors and 10 per cent “super tax” from 13 sectors including steel, banking, cement, cigarettes, chemicals, beverages, and liquefied natural gas (LNG) terminals,“ airlines, textile, automobile, sugar mills, , oil and gas, and fertiliser.

The revenue impact of around Rs35 billion has been calculated from the salaried class following withdrawal of tax relief of Rs47 billion given in the budget (2022-23).

In budget 2022-23, the total taxation measures were 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 totaled Rs30 billion. The net impact of the sales tax/federal excise measures stood at Rs60 billion.

The income tax measures were projected at Rs316 billion, whereas, relief has been provided of Rs49 billion. The net impact of the income tax measures totaled Rs267 billion. The revenue impact of the income tax measures has been increased after new taxation measures taken through amendments in the Finance Bill, 2022.

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.

Under the proposed upward revised tax slab, the salary slabs for income earning from Rs50,000 to Rs100,000 the tax rate of 2.5 percent has been proposed under the amended Bill 2022.

The salaried individuals who are earning monthly salary from Rs100,000 to Rs200,000, will now pay tax at a rate of 12.5 percent as compared to previous rate of 7.5 percent. In the case of a salary income of Rs200,000 per month, the annual tax payment will now be Rs315,000 (Rs26,250 per month). The current tax liability of this salary was Rs120,000 per annum, reflecting a huge increase in tax payment.

Under the fourth slab for the salaried class, individuals earning more than Rs2.4 million but not exceeding Rs3.6 million a year – will be charged at Rs165,000 and 20 percent of the amount exceeding Rs2.4 million.

Within the category of fifth tax slab, individuals earning more than Rs3.6 million, but not exceeding Rs6 million per year, will be charged at Rs405,000 and 25 percent of the amount not exceeding Rs6 million.

Under the sixth slab for salaried class, individuals earning more than Rs6 million but not exceeding Rs12 million in a year, now will be charged at Rs1.005 million and 32.5 percent of the amount not exceeding Rs12 million.

The last slab proposed for the salaried class revealed that the individuals earning more than Rs12 million in a year will be charged at Rs2.955 million and 35 percent of the amount exceeding Rs12 million.

Copyright Business Recorder, 2022