ISLAMABAD: The government has taken taxation measures of Rs440 billion and enforcement measures of Rs200 billion in the budget (2022-23) to meet the annual target of Rs7,004 billion including relief to the salaried class, a raise in the effective tax rate for banks from 39 percent to 42 percent, taxation of non-productive immoveable property, one percent Capital Value Tax on the liquid foreign assets of resident Pakistanis, a fixed tax scheme for small retailers and 0.25 percent tax on IT exports.
Other major taxation measures introduced through Finance Bill 2022 included two percent Poverty Alleviation Tax on high earnings of all persons (individuals, businesses, etc) having an income above Rs300 million, imposition of taxes on immovable properties such as plots or houses, more than one having a value of above Rs25 million [tax on deemed income from utilized property above Rs25 million], an increase in the effective tax rate of Capital Gains Tax on immoveable property, and higher taxes on the purchase of property/motor vehicles by persons not appearing on the active taxpayers’ list (ATL).
During the technical briefing on the Finance Bill,2022, held at the FBR House, the FBR Chairman, Asim Ahmad, with his team of members informed the media that total taxation measures have been proposed at Rs440 billion for 2022-23. Around 75 percent of the taxation proposals are related to direct taxes.
The total relief measures stood at Rs85 billion.
The net impact of the measures stood at Rs355 billion.
In order to materialise the fixed tax target of Rs7,004 billion, the FBR will generate Rs2,573 billion through direct taxes, and Rs4,431billion in the shape of indirect taxes. The FBR has taken customs duties measures of Rs34 billion and relief measures of Rs6 billion. The net impact of the customs duties measures stood at Rs28 billion.
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Sales tax/federal excise measures amounted to Rs90 billion, whereas, sales tax relief totaled 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 totaled at 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.
The FBR chairman said that the guiding principles for the budget included taxing real estate/farm houses/unutilized land etc, more emphasis on direct taxes, taxing high-income earners, relief to salaried individuals, tariff rationalisation, higher cost to non-filers, reducing the cost of compliance and consultation with stakeholders.
Major relief has been provided for salaried individuals having a revenue impact of Rs47 billion. The limit for taxation of salary is enhanced to Rs1,200,000 from the current limit of Rs600,000and the slabs have been reduced from 12 to seven. The maximum rate has been reduced from 35 per cent to 32.5 per cent.
The relief has also been provided to the business individuals and AOPs. The limit for taxation is enhanced to Rs600,000 from the current limit of Rs400,000.
The FBR chairman said that the existing income tax rate for banks (35 percent) has been merged with four percent super tax i.e. 39 percent. The tax has been increased from 39 percent to 42 percent for the tax year, 2023. The FBR will generate Rs28 bullion from this increase in taxes on the banking sector.
The Finance Bill has also proposed Capital Value Tax @ one per cent on the liquid foreign assets of resident Pakistanis.
Tax authorities stated that the FBR has increased the effective tax rate of Capital Gains Tax on immoveable property by increasing the threshold of exemption from four to six years.
The FBR will generate Rs40 billion from this measure. The FBR has synchronized capital gain tax on the disposal of securities with real estate.
He said that the government has increased the tax rate from 100 percent to 250 percent in case of the purchase of property by persons who are not active taxpayers. Similarly, there is an increase in the tax rate of 200 from 100 percent in case of purchase of motor vehicles by persons who are not active taxpayers.
The FBR has also imposed a tax on deemed income (@ five per cent of value) of non-productive immoveable property.
However, an exemption is available to one property plus a deduction of Rs25 million from other open plot. The effective rate of tax would be one percent of the value of the un-utilized residential/commercial/industrial plots, farm houses, etc.
The FBR will generate Rs30 billion from this revenue measures. The increase in rate of FED on locally-manufactured cigarettes would generate Rs10 billion and increase in FED on club, business and first class travel by air (Rs10,000 to Rs50,000) would generate Rs3 billion.
Copyright Business Recorder, 2022