by GHULAM ABBAS
- Government to increase multiple taxes in next budget
Apparently, to meet the increased financial demands after the announcement of over 25 per cent high development budget 2017-18, the government is going to increase tax rates in multiple sectors.
According to reliable sources, officials of Federal Board of Revenue (FBR), who are regularly briefing the Ministry of Finance ahead of the next budget, have proposed 100 per cent increase in Turnover tax which would affect Small and Medium Enterprises (SMEs) in the country.
According to the officials unlike profit taxes, turnover taxes cannot be evaded by over-reporting costs and in high evasion environments, turnover taxes may generate higher tax revenues than profit taxes. But at the same time, analysts believe that increasing cost of doing business to the already losses making enterprises makes no sense. It will destroy the small business.
FBR, sources claim, has also proposed to increase the Capital Value Tax (CVT) on real-estate claiming that introduction of taxes on properties has proved fruitful in the outgoing financial year. However, the measure, though could be better for generating revenue, is being taken without ensuring that the overall impact of the higher tax will not affect the low-income people, who would be barred from purchasing land due to high cost.
Recently in its budget proposals, Pakistan Real Estate Investment Forum (PREIF) had demanded the National Assembly’s Standing Committee on Finance, a friendly federal budget for real estate sector. The forum had urged the provincial governments to reduce provincial taxes such as stamp duty, CVT, Town Tax and Registrar fee in order to minimise transactions costs. At present rate of provincial taxes on stamp duty is 2 per cent, CVT is 2.5-3 per cent, town tax 1 per cent and tax on Registrar Fee is also 1 per cent. “Total rate of taxes in the province is around 7 per cent which needs to be brought down”, it noted.
According to insiders, FBR has also proposed to increase Withholding Tax on non-filers and increasing their cost of doing business. The government had introduced a scheme of differential taxation under which the non-filers of returns are subjected to a higher rate of withholding taxes on various economic transactions.
The analysts claim that the scheme has not yielded results and the number of return filers has not increased substantially as per expectation. According to them, the tax has forced people to avoid using banking channel, which ultimately has affected the business of banking sector.
During the ongoing deliberation on taxes at the ministry of finance, the sources claim that the FBR officials have also suggested shifting the general items bearing 10 per cent customs duty to the basket of items on which 15 per cent duty is charged.
Apart from other initiatives, the government will also continue collecting advance taxes from the corporate sector in the next financial year, sources said. They said Finance Minister Ishaq Dar has asked FBR to further increase the tax targets from various sectors.
