ISLAMABAD: The Federal Board of Revenue (FBR) shared the details of the new taxation measures of Rs400-450 billion, including the proposed plan on the Personal Income Tax Reforms to be incorporated in the Finance Bill 2022, with the Prime Minister Shehbaz Sharif on Saturday.

Sources told Business Recorder Saturday that Finance Minister Miftah Ismail, FBR Chairman Asim Ahmed, and his team of budget makers including FBR Member Inland Revenue Policy met Prime Minister Shehbaz Sharif at Lahore. On Saturday, tax authorities went to Lahore to brief Prime Minister Shehbaz Sharif to finalize the new budget proposals with new taxation measures to the tune of Rs400-450 billion for the next fiscal year. The initial sketch of budget proposals was discussed in detail during the meeting held with the Prime Minister at Lahore.

- These are proposed measures

• Number of slabs of the salaried class has been proposed to be reduced to six

• That there would be no change in the tax rates of the salaried class drawing salary up to Rs0.1 million

• A slight increase is expected for the salaried earners within the range of Rs0.1 million to Rs0.2 million per month

• More raise in income tax rate is expected for the salaried individuals earning a salary above Rs0.2 million per month

• Time-bound levy or additional income tax is proposed to be levied on the annual income/profits earned by the steel sector, pharmaceutical industry and other profit earning sectors and also raise the minimum tax from two to six percent on the import of edible oil in the budget (2022-23)

• Govt is considering increasing the rate of minimum tax from two to six percent on the import of edible oil in the next fiscal budget

• Finance Bill 2022 is expected to introduce a new concept of tax, i.e., “Windfall Levy” in the Income Tax Ordinance, 2001 for special taxation of the potential sectors making extraordinary profits, but not depositing the due amount of taxes

Tax authorities discussed in detail the strategy including enforcement and administrative measures to meet the Rs7.2 trillion revenue collection target for 2022-23. However, the Prime Minister has directed the FBR to meet the commitment of the present government to provide a conducive and friendly environment to the businessmen, ease of doing business, employment generation, export promotion, and economic growth of the country.

Sharing the proposed plan on the Personal Income Tax Reforms, the FBR reportedly informed the Prime Minister that the number of slabs of the salaried class has been proposed to be reduced to six. It has been proposed that there would be no change in the tax rates of the salaried class drawing salary up to Rs0.1 million. A slight increase is expected for the salaried earners within the range of Rs0.1 million to Rs0.2 million per month and more raise in income tax rate is expected for the salaried individuals earning a salary above Rs0.2 million per month.

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According to sources, the taxation proposals for these profit-earning sectors would help the budget markers to avert possible heavy taxation on different slabs of the salaried class. There are 1.9 million salaried taxpayers and the demand is to generate an additional Rs80 billion from the salaried class, earning Rs1 million to Rs6 million per annum.

Around 70 percent of the salaried taxpayers fall within the slabs of Rs1 million to Rs6 million per year. The FBR will go to any extent to avoid this measure of heavy taxation on the salaried class except for those earning very high salaries. A major chunk of higher tax to be generated from the salaried class is expected to be covered by taxation of high revenue earning sectors in the coming budget.

Tax authorities informed the Prime Minister that a time-bound levy or additional income tax is proposed to be levied on the annual income/profits earned by the steel sector, pharmaceutical industry and other profit earning sectors and also raise the minimum tax from two to six percent on the import of edible oil in the budget (2022-23).

The government is considering increasing the rate of minimum tax from two to six percent on the import of edible oil in the next fiscal budget to increase the incidence of tax on this high profit earning sector. The new levy is expected to be imposed on the sectors and industries earning huge profits and it would be imposed for a limited period.

The Finance Bill 2022 is expected to introduce a new concept of tax, i.e., “Windfall Levy” in the Income Tax Ordinance, 2001 for special taxation of the potential sectors making extraordinary profits, but not depositing the due amount of taxes. The FBR will collect the “Windfall Levy” from sectors earning extraordinary profits during the last few years. The “Windfall Levy” would be a separate tax and would be collected along with the income tax deposited every year. The “Windfall Levy” would be collected on an annual basis at the time of payment of tax by potential sectors on the filing of income tax returns, the sources added.

Copyright Business Recorder, 2022