ISLAMABAD: The PML-N government is set to propose nearly Rs4.5 trillion revenue collection target for its sixth and final budget with several measures to facilitate its realisation.
Top tax men have been tasked to prepare the first draft of tax relief and revenue measures in the next couple of weeks. The government has already set April 27 for the announcement of the Federal Budget 2018-19 to be followed by provincial ones.
An official source in the Ministry of Finance, who is privy to the budget-making process, told Dawn that the Federal Board of Revenue (FBR) is working on various proposals to support 15pc growth in revenue collection in 2018-19. These measures will also take into consideration impact of GDP growth and inflation as well.
The FBR expects to collect around Rs3,900bn by end of this fiscal year on June 30, which would be almost twice of the tax revenue when PML-N came to power in 2013.
FBR is tasked to find resources for 15pc increase in revenue collection
Another source in the FBR told Dawn that revenue measures will move around changes in the tax rates especially in withholding tax (WHT). “We are working on proposals to enhance WHT rates for non-filers,” the source said.
The scope of these withholding taxes will also be extended to a maximum number of sectors, he added.
The government has imposed 20 new WHT since June 2013 while increasing the rates for non-filers on the pretext of improving tax compliance. The number of WHT categories has risen to 56 from 36 since June 2013. As a result, WHT equalled over 70 per cent of the total direct tax collection.
Other potential areas where taxes will be raised include regulatory duties on non-essential and luxury items. Moreover, the FBR has also identified several items, which imports have surged due to free or preferential trade agreements, for imposition of regulatory duties.
In consultation with stakeholders, the board has also developed a list of those products which will be subject to regulatory duties in a bid to provide protection to local industries.
Rates of sales tax, federal excise duty, etc will also be rationalised. “We are also working on administrative measures to shore up revenue collection in all taxes,” the source said, adding that maximum impact on revenue collection will be from administrative measures.
Tax officials also believe that the expected depreciation of the rupee in the next fiscal year may also lead to higher revenue collection. On the relief side, the FBR is also considering various taxes whether to retain them or withdraw in the next year budget.
On top of the list is the super tax, which was introduced to support the internally displaced persons from tribal areas. “We are working on it whether to continue it or withdraw it”, the source said, adding that final decision will be taken by the prime minister.
The other proposals under consideration are whether to continue or drop 5pc withholding tax on bonus, inter-company dividend tax etc. These taxes were introduced three years back, but there is a demand for its discontinuation, the source added.
The tax credit and relief introduce on installation of new plants are set to end by June 30, but there is an active consideration to extend it further to facilitate new investors. Measures will also be taken to boost stock exchange.
The tax authorities are also working on three proposals — raising exemption limit, reducing tax rate for individual taxpayers and introduction of simplified return form.
It is proposed to enhance the basic income tax exemption limit to a minimum of Rs500,000, from the existing Rs400,000 for the salaried class.
However, final decision will be taken following consideration whether the increasing limit did not impact the total numbers of return filers.
Various options are under consideration regarding the slashing of tax slabs for individual taxpayers. Currently, the highest income tax slab of 35pc was applicable to income of individual taxpayers. We are working on different model considering its revenue impact,” the source said.
Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan confirmed to Dawn that the FBR has initiated work on preparing tax proposals for the budget 2018-19.
Mr Khan said the crux of the tax proposals will be pro-industry and will be laden with measures to promote manufacturing. “We will remove all those taxes which are hurting industrial sector,” the special assistant said.
However, he categorically clarified that no burden will be made on the existing taxpayers.
Regarding the budget preparations, the special assistant with a status of federal minister said tax proposals after firming up will be presented to prime minister to solicit his views on it.
He said that he has instructed top tax officials to arrange meetings with trade and industry chambers and associations to seek their input on the tax matters.