ISLAMABAD: Finance Minister Miftah Ismail Friday announced a 10 percent super tax on 13 sectors – having yearly income of over Rs300 million – to reduce the budget deficit to end reliance on foreign assistance and take the country toward economic sovereignty.
Winding up debate on Budget 2022-23 in the National Assembly, Miftah said “the government has identified 13 sectors which had earned significant profits this year.”
“We’ve decided that companies which have an income of more than Rs300 million will be subject to a super tax of 10 percent for a year. The 13 sectors include cement, steel, banking, airlines, textile, automobile, sugar mills, beverages, oil and gas, fertilizer, cigarettes, chemicals and LNG [liquefied natural gas] terminals,” he added.
He said that individuals and companies earning Rs150 million will have to pay one per cent additional tax, two per cent additional tax on Rs200 million income, three per cent on Rs250 million income and four per cent additional tax on Rs300 million income.
“This tax will be for a period of one year,” he added. The minister said that the country is no longer heading towards a default as it has now moved on to a path of progress.
Miftah said that most of the recommendations put forward by lawmakers in the Senate and National Assembly during preceding sittings had been incorporated into the budget.
“The long-term benefits of this budget will be that the country will become self-sufficient in edible oil, wheat, and other commodities just as the PML-N government had left it during its last regime,” he added.
He said that funds for farmers in the budget were not to be considered as subsidies but as investments, adding “we believe that if we will invest in farmers, they will give us the best returns.”
The minister further added that the outgoing fiscal year 2022-23 will be considered a bad year in the country’s history as the country had a huge budget deficit and missed several targets.
“The federal government’s budget deficit this year was Rs53,010 billion while the total deficit was Rs74.04 billion,” he said, adding such a deficit means that the government has to ask for money from the entire world.
Taking a jibe at former prime minister Imran Khan’s narrative regarding self-sufficiency, he said: “We talk about self-sufficiency and independence, but what kind of independence is this when you take Rs20,000 billion in loans during a period of three to four years”.
The minister claimed that the coalition government saved the country from defaulting that the PTI government had taken the country close to.
He said the federal government has posted a deficit of 8.95% of the old gross domestic product (GDP), adding that this showed the wide gap between the country’s expenditure and resources.
“And then we have to take funds from others…it was for this very reason that he had to go on multiple foreign trips right after becoming the finance minister in April,” he added.
He also blamed the previous government over fuel and energy subsidies that it had announced on February 28.
The subsidies, he said, were worth Rs120 billion and thanked the PML-N partners in the coalition set up for accepting that the government could not bear this expense at a difficult time like this.
“It was a tough decision to end the subsidies,” he said, acknowledging the coalition parties for supporting the tough decision.
He termed the restoration of the International Monetary Fund (IMF) programme necessary to save the country from defaulting.
The minister highlighted that now IMF itself has confirmed that major progress has been made in talks with Pakistan, which he said would be reflected in the upcoming steps taken by the government.
Commenting on the taxes, he said the government did not impose indirect taxes and taxes on consumption which impacts the poor disproportionately.
“Taxes have been imposed on the rich and elite and companies to generate more capital from them so that we don’t have to beg for money from the world,” he added.
Moving on to the gold markets in Pakistan, he said that there are over 30,000 gold shops, however, only 22 are registered and their average sales are worth Rs4,000 per day.
“These market owners show their sales at Rs4,000 but we believe the average sales amount to approximately Rs100 million,” he said, announcing that a fixed income and sales tax worth Rs40,000 has been imposed on the shops that cover an area of less than 300 square feet so that all gold shops come into the tax radar.
Meanwhile, 17 per cent sales tax has been reduced to three per cent for shops covering an area of more than 300 square feet (and fall under tier-1) as such higher tax can never be received from jewellery markets.
Besides, the withholding tax of four per cent has been brought down to one per cent for local consumers who sell gold in the markets.
The minister said that the taxes imposed on the gold sector are mostly in line with the recommendations of gold shop owners.
He further said that a special scheme will soon be introduced for people who are involved in the real estate business, for builders – who sell the property after its construction – car dealers, and restaurant owners under which fixed income tax will be imposed on them.
“We want to tax them their income and not their expenditures which is why the government has decided to impose fixed taxes on these businesses,” he said, maintaining that this would not add to rising inflation and only increase revenue
The minister reiterated that they have tried to put less burden on the poor, adding because of this the prime minister has launched a cheap petrol and diesel scheme under which so far more than four million people have registered.
He also clarified that these four million people are other than those who are already registered under the Benazir Income Support Programme (BISP), adding these people have been given Rs2,000 each which amounts to Rs16 billion.
The finance minister said that in line with their agenda to reduce the burden on poor people, the government has initiated a programme for Utility Stores Corporation (USC) under which wheat, ghee, and sugar will be provided at cheaper rates throughout the year.
Moving towards some other concessions which have been decided after considering the recommendations, the finance minister announced the following: Condition of withholding tax on IT sector companies withdrawn; companies with sales less than Rs800 million exempted from withholding tax, statement submission; tax on venture capitalist funds invested in IT sector removed; minimum tax on oil marketing companies which was 0.75 per cent reduced to 0.5 per cent; commission on outgoing indenters at the time of receipt slashed to one per cent from five per cent; provision of 50 per cent reduction in capital gains tax for those who had been allotted plots while in service restored; families of martyred and war-wounded individuals exempted from tax on income from plots; sales tax on leather and surgical instruments industries removed; overseas Pakistanis who had a NICOP would be included in the list of active taxpayers so they don’t have to pay additional taxes on property purchases.
The minister informed the house that the tax target, which was initially set at Rs7.4 trillion had been increased to Rs7.47 trillion. At the same time, he added, the target of non-tax revenue which was set at Rs2 trillion had been revised down to Rs1.94 trillion.
He announced that the government will give Rs4.37 trillion to the provinces.
“After all these expenses, the federal government’s deficit would stand at Rs4.55 trillion and total deficit at Rs3.78 trillion,” he added.
He recalled that when the erstwhile Fata was merged with Khyber-Pakhtunkhwa, the tribal areas had been given an exemption from tax “of every kind” until 2023.
Miftah said the government intended to introduce a bill to exempt the residents of these areas from paying income tax, but companies and industries operating in these areas would be brought into the tax net.
“My own company will give above Rs200 million in tax. The companies of the prime minister and his sons will also pay high taxes. If we are asking others to pay high taxes, we are doing the same too,” he claimed.
Moreover, under a new scheme, he added, their income tax and sales tax have been fixed to their electricity bills, adding a fixed tax of Rs3,000 from small shops and Rs10,000 from big shops will be received monthly from these shops with their electricity bills.
“After that, they will owe nothing to the Federal Board of Revenue (FBR),” he added.
Copyright Business Recorder, 2022