Islamabad:
The government can set a new tax objective to more than RS14.3 Billion, which is higher of RS2 Billions compared to the revised downward objective of the exercise and may require at least 500 billion rupees of additional measures to achieve this.
After working the new tax objective figure for the year 2025-2026, the government began the exercise to preselect measures that it should show that the objective of RS14.307 Billion is realistic and achievable.
The Minister of Finance Muhammad Aurangzeb is expected to give his second speech on the budget on June 2 or 3 before the Eid holidays.
The objective of RS14.307 Billions is equal to 11% of the planned size of the economy of the next year.
A senior FBR official told L’Express PK Press Club that the number of absolute tax targets could change, depending on the size of the economy, but that 11% of GDP would be the objective.
The development came then that the deadline to inform companies of the acceptance or rejection of their budgetary proposals collapsed. The government had invited proposals from various chambers and commercial associations in January with a promise to respond by the end of April on the number of people can be accepted in a realistic manner.
When he was contacted, the Minister of Finance Muhammad Aurangzeb said that the examination of the budgetary proposals was underway as these proposals still arrived.
The RS14.307 Billion for the financial year 2025-2026, from July, is provisional and subject to approval by the International Monetary Fund which visits Pakistan from May 14 to examine the budget.
The objective of RS14.3 Billions is 16% or 2 billions of more rupees than the target of 12.3 Billion of rupees this year, according to government sources. It is also higher than the figure that the FBR presented to the Minister of Finance, which was significantly lower than the objective that the government wishes to set for tax machines.
For this exercise, the government had set the original tax objective of almost Rs 13 Billions or 10.6% of GDP. Due to the drop in inflation and lower economic growth, the objective was revised downwards to Rs12.3 Billions, but it remains constant to 10.6% of GDP.
The sources have indicated that the authorities will have to take around 500 billion rupees of tax value to make the next realistic target and to end any uncertainty associated with it. These measures would exceed and above RS1.3 Billions of additional taxes, which were imposed on people, mainly on the salaried class, to achieve this year’s objective.
Despite an extraordinary burden on the people, the FBR has so far faced the tax gap of 830 billion rupees, stressing that the ability of the economy to pay more to be eroded without broadening the base. What is equal to a mini-bunda, the government has already increased the oil levy rate from RS18 to RS78 per liter under a different pretext to compensate for the impact of the FBR deficit.
The president of the FBR, Rashid Langrial, said on Wednesday that the budget of next year would be difficult in terms of tax objectives, preventing people on the next tax measures.
OICCI budget proposals
Meanwhile, the Minister of Finance Muhammad Aurangzeb held a meeting with the Chamber of Commerce and Industry of Investors Abroad (OICCI) to discuss its budgetary proposals. The OICCI has not been informed if one of its proposals would be accepted.
The association has suggested that the government withdraw RS5,000 currency tickets to discourage the cash economy. The size of the informal economy is estimated at least 40% of the formal economy, but the government does not seem serious to repress the informal economy.
The OICCI has also recommended to exempt chemical dealers of 2% of the withholding tax which is billed to distributors on supplies to traders.
In an important proposal, the association also asked to abolish 10% surcharge on individuals earning 10 million or more rupees on compliant taxpayers, as it has an unfair burden on regular declarants.
The highly marginalized salaried class of Pakistan paid 391 billion tax rupees in just ten months. The salaried class paid 10% of the total income tax paid by the whole of Pakistan, against 0.6% paid by traders with blue eyes.
The OICCI has recommended that the government exempt up to Rs 100,000 monthly tax income, which is justified request given the rapid purchasing power of the population. He suggested that to keep the number of declarants, the government could impose a tax of RS1,000 token for revenues above RS600,000 to Rs1.2 million annual income.
He also asked for a tax credit for deductible allowances for housing loans, education and medical costs. The OICCI has recommended that it limit the taxation of the company’s contributions to the 10%provident fund, eliminating the ceiling of RS150,000.
He also asked for a specific exemption from the capital value tax of% on foreign assets for expatriate Pakistani and foreign nationals become resident employees.
In a major proposal, the OICCI required to gradually reduce the tax rate of companies from 29% to 25% thanks to an annual reduction of 1% to align with other emerging economies. He sought to abolish the super tax gradually over three years, in the first phase, going from 10% to 6% compared to July.
The OICCI required to remove 15% of income tax on dividend payment, bringing the rate to 64% for certain companies.
The OICCI also demanded to reduce the sales tax to 17%, which the government may not accept due to its major bump on the budget.
The association asked to declare petroleum products as taxable supplies allowing adjustments to the input tax, but the FBR has shown a reluctance due to the IMF program.
He also rightly demanded to reduce the 5% wrapped milk tax, from 18% to encourage growth in the dairy sector, improve nutrition and affordability for the general public. In another major proposal, the OICCI asked to restore the zero rating of the sales tax on local supplies under the export facilitation diagrams (EFS) by removing 18% of the GST. The IMF is not in favor of the withdrawal of this tax.
OICCI has requested reducing federal excise duties to 18% airy waters and juices at 15%, which has harmed the growth of these companies.
