FBR considering other options to enhance tax net


ISLAMABAD: After scrapping the proposal of corona tax for higher income brackets, the FBR is considering more options such as raising the tax on cigarettes, expanding the supply chain of GST in VAT mode starting from manufacturers, wholesalers to now large retailers, the imposition of one-time land tax on assets as well as providing relief to small and medium enterprises

The government plans to negotiate with the IMF to slash down the next fiscal year target from Rs5,103 billion to Rs4,800 to 5,000 billion. It is premature to ascertain exactly the next year’s target with authority as efforts will be made to convince the IMF for maximum reduction against the desired target of Rs5,103 billion for the next budget.

The FED on the tobacco sector might be further jacked up but the formal sector is of the view that with abolishing the three-tier system, the overall collection might reduce from Rs124 billion in the last fiscal year to Rs115-Rs116 billion for the current fiscal year. The share of illicit cigarettes has gone up and the FBR also failed to place track and trace system after the decision of the higher judiciary.

The FBR higher-ups had kickstarted presenting budget proposals before Advisor to the PM on Finance Dr Abdul Hafeez Shaikh as another important meeting is expected to be held today (Friday).

One important member of the economic team who is part of the ongoing deliberations told this correspondent that the government must consider only providing relief to those sectors that must extend help for kickstarting sluggish economic activities.

At this point in time, any proposal for slapping additional taxes would further damage the economy. However, he suggested that the FBR could move ahead towards completing the value chain for bringing GST in VAT mode from manufacturers to wholesalers and now bringing mega-retailers into the whole tax net.

The official said that the economy in the post-COVID-19 situation had changed altogether so the parameters of pre virus could not be applied in the current circumstances. The economy does not require routine solutions so the government will have to avoid normal prescriptions.

When contacted to top officials of FBR, they argued that they presented different proposals mainly for providing tax relief and incentives to organised corporate sector on raw material and intermediatory goods on tariff and small and medium enterprises on all tax fronts.

A one-time land tax is also under consideration but its exact details will be worked out in the coming days. Things will only be finalised after discussions with the IMF, they added.

Dr Khaqan Najeeb, the former advisor to the Ministry of Finance, said that the government should aim for a tax-free budget other than increases in sin taxes (alcohol, tobacco, sugary drinks etc), one-time tax of sectors showing abnormal profits and a one time tax on land.

He said it would be fair to start thinking about distributive taxation like an inheritance kind of levy on large transfers with low rates, to begin with. Dr Khaqan emphasised that a maximum push on monitoring, enforcement and compliance has to come from all the smart folks in FBR. He said this, along with nominal growth will help us get Rs600 billion above where we finish in FY-20. Dr Khaqan further said it is essential for us to implement a reform of making compliance simple, less document focused and digitised.

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