Summing up Budget Proposals 2018-2019 for you

Summing up Budget Proposals 2018-2019 for you

The Government of Pakistan has announced that it will present the annual budget for Fiscal Year 2018-2019 on 27^th April 2018 before the National Assembly. This new budget is going to be announced five weeks earlier than the usual date.

Various state institutions and organisations have put forward various suggestions to the government for this fiscal year’s Budget.

Federal Bureau of Revenue (FBR)

FBR has suggested a nominal tax rate of 1% for an income group of PKR 500,001 to PKR 800,000. It is expected that the tax burden of this income class will come down by 90%. Currently, the income tax rate for income group PKR 400,001 to PKR 750,000 is 10%. Here is a list of the proposals offered by the FBR.

• 2% tax rate is suggested for the income group PKR 800,001 to PKR 1,200,000. The existing tax rate for the income group falling between PKR 750,001 to PKR 1,500,000 is PKR 35,000, in addition to 10% tax on value exceeding PKR 750,000.
• Persons with an annual income exceeding PKR 1,200,000 to be charged at different tax rates falling between 15% and 20%. This is expected to give tax relief of about 43% to the highest income bracket. Currently, there are four income tax brackets for persons earning between PKR 1,500,000 to 6,000,000.
• Income tax exemption threshold to be at PKR 500,000.
• Highest income tax rate for the salaried class to be lowered from 35% to 15%.

Islamabad Chamber of Commerce and Industry (ICCI)

President ICCI, Sheikh Amir Waheed has emphasised that the high tax rates in the country are the major cause in promoting tax evasion, and should therefore, reduce the tax rate. This, he said, would improve tax-to-GDP ratio and enhance the tax base of the country. Some more suggestion were as follows:

• GST to be reduced from 17% to a single digit.
• Witholding Tax Regime to be streamlined by FBR officials to remove any discrepancies.
• Senior Vice President ICCI, M Naveed and Vice President ICCI, Nisar Mirza Average Tax Rate on Corporate Income to be brought down as a means of encouraging investment and strengthening corporate sector.
• MPA Raja Hanif Advocate has lent support to these proposals of ICCI for reduction in taxes and stressed that the government should include these in next Budget Proposal.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI)

FPCCI has proposed to the Federal Board of Revenue (FBR) to reduce tax rates in order to establish a competitive edge for the country’s products in the global markets. In the official press release by FPCCI, it was highlighted that this would broaden the tax base and also help curb the problems of tax evasion and corruption.

The proposals by FPCCI have pointed out that more than 4 million National Tax Number (NTN) holders were 2.1 million in 2006-2007, which dipped to 1.39 million in 2017. In order to facilitate the existing tax payers, provisions should be made that would ‘persuade the tax filers and not persecute them’.

FPCCI also highlighted that the manufacturing sector was contributing to 20.9% of the national economy, while holding a share of 70.4% in tax payments, whereas the agricultural sector has a share of 19.5% in Gross Domestic Product (GDP) and a share of only 1.2% in tax payments. Thus, FPCCI has pointed out that fewer taxes should be levied on the manufacturing sector.

FPCCI has said that the tax base needs to be broadened so that the tax-to-GDP ratio is improved significantly.

Pakistan Automotive Manufacturers Association (PAMA)

PAMA has requested that the government should reduce the input tax rate on tractors, which is causing a serious liquidity crunch in the tractor industry.

The organisation has further highlighted that the rate of sales tax rate for tractor is 5%, whereas on components purchased locally as well as imported the sales tax is 17%. They’ve suggested that the sales tax should be eliminated or rationalised on the purchase of imported tractor components as they believe that there is no rationale for the imposition of sales tax by Government at the time of import and subsequently implementing taxes for the sale and purchase of the same.

These budget proposals present a good opportunity for the government to make a Budget that would suit most of the people in this country. However, only in a month’s time will we know for sure if these proposals have been passed or not.