ISLAMABAD: The government has taken new taxation/administrative measures of Rs 253.200 billion by substituting one percent duty; doubling rate of 'further tax' from 1 to 2 percent on supplies; increase in rates for capital gains tax (CGT) on securities; increase in withholding tax rates for non-compliant persons; 0.6 percent withholding tax on all banking instruments for non-filers and 7.5 percent advance tax on domestic electricity consumers ( whose monthly bill is Rs 75,000 and above).
One of the major taxation measures of Rs 35 billion is adjustable advance income tax at the rate of 0.6% of the amount of transaction that is proposed to be collected on all banking instruments and other modes of transfer of funds through banks from non-filers of returns. The difference of withholding tax rates between filers and non-filers would generate Rs 23 billion in 2015-16. The increase in the rate of FED on cigarettes would generate Rs 12 billion. Rationalising Tax Rates for Various Sources of Banking Companies would generate Rs 6 billion.
The government has withdrawn concessionary/exemptions statutory regulatory orders (SROs) of Rs 132 billion in 2015-16. Federal Board of Revenue has proposed revenue generation measures worth Rs 238.200 billion and administrative measures amounting to Rs 15 billion. In total, the taxation and administrative measures would be Rs 253.46.255 billion. The FBR has taken relief measures of Rs 29.210 billion. Out of Rs 238.200 billion new taxation measures, direct taxes measures of Rs 152.750 billion have been taken in budget. Sales tax and federal excise duty measures totalled at Rs 58.060 billion. The taxation measures pertaining to customs duty totalled Rs 56.600 billion.
An official said that the increase in rate of further tax from 1 to 2 percent would generate Rs 8 billion; increase in CGT rate on disposal of securities Rs 4 billion; increase in sales tax on mobile phones Rs 8 billion and substitution of one percent duty slab with 2 percent customs duty would generate Rs 5 billion.
The relief measures taken for the customs duty totalled at Rs 14.650 billion; sales tax Rs 4.060 billion and relief measures regarding income tax stood at Rs 10.500 billion for 2014-15.
On the relief side, the corporate tax rate has been reduced from 33 to 32 percent; reduction in Withholding Tax in case of Token Tax and Transfer of Vehicles; limit of capital at Rs 25 million for qualifying as a small company is proposed to be enhanced to Rs 50 million and salaried taxpayers earning taxable income from Rs 400,000 to Rs 500,000 are chargeable to tax at the rate of 5%. To provide relief to this class the rate of tax is proposed to be reduced to 2%. Non-Salaried individual taxpayers and Association of Persons earning taxable income from Rs 400,000 to Rs 500,000 are chargeable to tax at the rate of 10 %. To provide relief to these taxpayers the rate of tax is proposed to be reduced to 7%.
The revised capital gains tax (CGT) on disposal of securities revealed that where holding period of a security is less than 12 months, the rate of tax would be 15 percent for Tax Year 2016; where holding period of a security is from 12 months to 24 months, tax rate is 12.5 percent and where holding period of a security from 2 years to 4 years, the rate of tax is 7.5 percent.
Taxation measures revealed that the rate of Federal Excise Duty on aerated waters is being enhanced from 9% to 12% of retail price; increase in the rate of sales tax on mobile phones to Rs 300, 500 and 1000, from Rs 150, 250 and 500, respectively, depending on features of the mobile set and rationalisation of sales tax on steel sector melters, re-rollers and ship breakers and enhancement of rates of Federal Excise Duty on locally produced cigarettes. Average tax incidence to increase from 58% to 63%
The present rate of 10% tax on dividend income is on the lower side as compared to most other countries. It is proposed that the rate be increased to 12.5%. Consequently, in case of non-filers the rate of tax is proposed to be increased from 15% to 17.5% of which 5% shall continue to be adjustable. For Mutual Funds the existing rate of 10% shall continue.
Presently, tax rate of 35% is applicable to banking companies from all sources except income from dividend and income from capital gains. Rate of differential for different sources is proposed to be removed.
At present there is no withholding tax on either use or right to use of commercial, industrial and scientific equipment or on renting out of machinery. It is proposed that a 10% withholding tax be imposed on renting out machinery and for use or right to use commercial, scientific or industrial equipment, in case of residents also, and be treated as final tax liability.
Finance Bill 2015 revealed that to encourage public listed companies to distribute dividend which would encourage investment in stock markets, it is proposed that in case of a listed company other than a scheduled bank or a modaraba, which does not distribute cash dividends within six months of the end of the said income year or distributes dividends to such an extent that its reserves, after such distribution, are in excess of hundred percent of its paid up capital, the excess amount may be taxed at the rate of 10%.