ISLAMABAD: The Federal Board of Revenue has sent a summary of new taxation measures to the Ministry of Finance for approval which aims to raise revenue from Rs50 billion to Rs60 billion in the next few months.
“We have submitted the proposals with Finance Minister Dr Abdul Hafeez Shaikh for approval,” a senior tax official told Dawn on Thursday.
FBR has informed the finance ministry that the tax machinery was facing huge shortfall in income tax and sales tax collection.
Six areas were identified for the new taxations.
Almost 84 per cent of tariff and duty rates had either been exempted or reduced for the benefit of certain influential lobbies and elite in the country through SROs during the past years.
The new taxes would be raised from withdrawal of major tax exemptions, reduction in duties for various sectors through SROs and special procedures.
The FBR has proposed to withdraw exemption on domestic sales of five sectors products — textile, sports, carpet, surgical and leather goods.
Currently, the FBR is charging five per cent duty on sales of these products in domestic market as against the standard rate of 16 per cent.
The board estimates an annual revenue collection by withdrawal of zero-rating on these sectors to Rs36 billion. For five months, collections from these sectors would be Rs15 billion.
A tax official said that textile lobby was opposing levy of full taxes on domestic sales and this would make it difficult for the FBR to withdraw exemptions on sales in domestic market.
As per international standards, exemptions are granted only on export proceeds.
The FBR also proposed that rate of withholding tax be enhanced from 0.5 per cent to 1 per cent on supplies to exporters to yield an amount of Rs3 billion from increase in the tax rate.
Similarly, the FBR has also suggested introduction of a uniform rate of 3 per cent withholding tax on import of all goods, including edible oil, scrap etc. Edible oil import will yield substantial revenue from the sector.
Currently, two per cent withholding tax is imposed on import of edible oil and one per cent on scrap. The upward revision of duty rate to 3 per cent from one and two per cent would yield annual Rs15 billion revenue for the exchequer.
The FBR has also proposed further tax of three per cent on commercial importers to un-registered persons. This is believed to yield around Rs3 billion.
Moreover, there is a proposal to disallow input tax adjustment on un-registered sales. This administrative measure will also stop the undue payment in refunds to unscrupulous people.
The FBR also proposed to raise upward the federal excise tariff on cigarettes, which would easily generate an additional Rs10 billion. Currently, tax rates in Pakistan are lower than international standards.
The FBR had already lowered the annual revenue collection target to Rs2231 billion from earlier projected target of Rs2381 billion.
In case government did not announce new measures, the FBR informed the finance ministry that revenue target would have to be revised further downward, the official added.