ISLAMABAD: The government is set to introduce new taxes in the upcoming budget, in addition to Rs80 billion it hopes to collect this fiscal year by withdrawing tax exemptions.
“We have to levy taxes for higher revenue collection in 2014-15,” Federal Board of Revenue (FBR) Chairman Afzal Bajwa told reporters on Tuesday after briefing the Senate Standing Committee on Finance on the performance of tax machinery.
The statement is in contrast to Finance Minister Ishaq Dar’s pledge last week that the budget 2014-15 will not bring new taxes.
In its first budget, the PML-N government introduced more than Rs200bn taxes.
Bajwa said total exemptions given through SROs are Rs480bn. Of these, only Rs240bn can be withdrawn which are believed to be benefiting the elite, he said. The decision will be finalised in a committee meeting to be held in a week.
A senior tax official told Dawn that it depends on the government to withdraw all exemptions in this budget or spread it over a period of three years. “Next year’s budget will have two major tax components — withdrawal of exemptions and introduction of new taxes.”
FBR’s chairman said the total cost of tax exemptions is two per cent of the gross domestic product (GDP). Of these, 0.9pc or 1pc can be withdrawn as recommended by the committee.
He said the government would have to introduce new taxes as revenue collection could not grow without them.
On the pattern of last year’s seven new withholding taxes, the FBR is planning similar measures to collect easy money from the people.
Bajwa hinted that the coming budget will introduce a string of revenue measures to raise the cost of doing business for those people who are not on the tax net. “We will introduce higher rates of taxes for the non-taxpayers,” the chairman said.
For example, the tax rate will be high for those who consume gas bill of around Rs15,000 a month, but do not exist on the tax roll.
The government projected the budget deficit to fall to 4.8pc in 2014-15 from current year’s 6.3pc, for which it will either have to increase revenue or reduce expenditure.
But FBR’s chairman said growth in economy and inflation is insufficient to ensure enough growth in revenue, suggesting that new revenue measures are inevitable.
The tax base of Pakistan is lowest in the region. The government has issued more than 91,000 notices to potential taxpayers during this fiscal year.
Of these, only 8,600 have voluntarily filed their tax returns. These people have deposited only Rs50 million in revenue. But an FBR official said that notices were issued to over 12,000 people involving a tax amount of Rs4.1bn.
Former finance minister Saleem Mandviwalla criticised tax officials for the poor outcome of the drive to increase tax collection. He said the previous government introduced a tax reform bill which was lying with the parliament for the last nine months. “If you want to increase the tax base, re-introduce the bill in the parliament.”
The chairman admitted that a revenue shortfall of around Rs70bn will be witnessed in the last quarter of this fiscal year. He said overall shortfall in revenue collection from the budgetary projected target will be Rs170bn this year.
Published in Dawn, May 14th, 2014.