Islamabad:
The International Monetary Fund has reduced its objective in the new budget to mainly on additional tax measures and rebalance the National Finance Commission Award, while the government has trouble finding a space to relieve the salaried class and the real estate sector.
The salaried class was the hardest affected, which, according to the new details, paid a historic record of 437 billion income tax in just 10 months of this exercise. The amount is higher by 150 billion rupees compared to last year.
On Thursday, the IMF urged the Pakistani authorities to listen to its experts instead of relying on the arguments concerning the realities of the soil or the tax theory of the Laffer curve, according to sources. The Pakistani authorities mentioned the low income due to high tax rate, which the IMF did not appreciate, they added.
During a separate session, the IMF also raised questions about the functioning of the Federal Board of Return to reduce employee class taxes, government sources said. They added that the IMF was of the opinion that the proposed reduction in rates for the salaried class can lead to a much higher repair than the alleged government. The FBR was now redoing the taxes of the salaried class.
The sources said that during the kick -off meeting with the Minister of Finance Muhammad Aurangzeb on Thursday for the approval of the budget, the leading mission chief of the IMF, Nathan Porter, reduced the attention of his mission to four areas.
The highest IMF priority would be income measures to support the RS tax objective14.307 Billions and rebalance the distribution of tax resources under the NFC without affecting the constitutional regime. Sources have said that the other two areas of interest during talks will be saving the government’s workforce reduction and the privatization program in the next fiscal year. ]]
The provinces obtain 57.5% of federal tax actions and the government tried to retain some of the sums without modifying the Constitution. At a meeting last week, a cabinet minister recommended obtaining 50% of the province’s additional defense expenses due to increasing requirements after India’s naked hostilities against Pakistan.
The IMF team practically started discussions on the new Turkey budget on Wednesday. The team plans to go to Islamabad next week for the last round of talks ending on May 23.
The sources said that during the launch meeting, the Pakistani authorities raised the issue of higher tax rates leading to low collection in certain areas. However, the leaving mission chief of the IMF advised to listen to his experts. The IMF team did not seem to be impressed by the economic theory of the Laffer curve.
During a meeting linked to taxation with the FBR, the authorities shared the proposal to reduce taxes for the salaried class. The sources have indicated that the government has proposed to increase the income tax exemption threshold by 600,000 rupees to 1.2 million rupees per year.
He also proposed to set new slabs of 10%, 25%, 33% and 35% while adjusting income levels where these slabs will become effective. However, the IMF’s point of view was that it was going to lower the income considerably.
According to new details, the employees paid an RS437 billion rupered record during the July-root period of this exercise, which was 150 billion rupees more than the last exercise. With two months to play, the additional contribution would increase to approximately RS190 billion, against 75 billion rupees that the government had claimed in June from last year.
The merit guarantees that the burden of the employee class should be reduced by at least 100 billion rupees, because everything that is not lower than discrimination with the class.
The sources said that the government did not have enough budgetary space to relieve significant relief in the real estate sector. The initial proposal is to reduce restraint taxes on the sale and purchase of properties by only 0.5% each. The FBR wanted that after lowering the taxes, they should be treated as a final responsibility, but the Minister of Finance asked to keep these adjustable.
There was also a proposal to introduce a new capital gains tax plaque for higher property income, sources said.
This week, discussions also took place in government to reduce the sales tax on packaged milk. Some FBR members have proposed to reduce the rate by 18% to 15% or 17%. However, no decision was made with a senior official suggesting to maintain the unchanged rate.
The 18% sales tax on packaged milk is the highest in the world despite higher malnutrition in Pakistan. While making a decision to reduce milk tax, FBR managers did not have a clear idea of the price of milk wrapped on the market.
Tax authorities also proposed to slap federal expansion rights on cookies, but there was no agreement on this subject within the government. The proposal to slap a new tax on the cookies and to discuss at the level of the Minister of Finance shows the insensitivity of the government.
The sources have said that the government also envisaged two options concerning the withdrawal of the tribal areas tax franchise administered by the federal government. A proposal was to introduce the standard rate of 18% while the second proposal was to introduce a rate of 10%, sources said. However, the final decision will be taken by the senior PML-N, said the sources.
