Budget Strategy: No amnesty schemes; individual tax threshold to be lowered for broadening of tax base

Budget Strategy: No amnesty schemes; individual tax threshold to be lowered for broadening of tax base

ISLAMABAD: The government has prepared budget strategy under which no more amnesty scheme will be offered in future. Meanwhile, the tax threshold to broaden the tax base.

The medium term budget strategy paper 2020/2023 released by the ministry of finance stated that the government will increase the share of direct taxes in revenues by enforcing real-income based income tax, to be achieved by broadening of tax base.

Documentation of the economy to increase taxation in wholesale and retail, real estate and speculation businesses is also a priority. “Amnesty schemes will no longer be offered, and exemptions will be curtailed. Income tax slabs will be rationalised, and thresholds will be lowered to broaden tax base.”

Gradual phasing out of final tax regime will help in taxing real income. Through amendments in tax law, simplification of laws and regulations, and improvement in tax administration, a legal basis will be provided to risk-based audit system.

Taxpayer facilitation measures include awareness campaign and taxpayer education facilitation. Investments in IT based customer relationship management system, support lines, emails and website will be strengthened.

Measures will also be taken to encourage voluntary compliance through facilitation measures and increasing certainty of detection and enforcement of law.

Proper targeted awareness campaign through official media houses, using commercial media means will be carried out.

FBR is effectively using Information Technology support for efficient detection, monitoring and facilitation of the tax regime. Data on foreign bank accounts of Pakistani citizens is being received and analyzed to detect tax evasion.

IT based databank regarding foreign bank accounts will be established. Tracking and tracing system for collection of Federal excises duty on cigarettes has commenced with the issuance of licenses. Electronic monitoring of production and sales of various sectors will also commence in due course of time.

Installation of point-of-sale (PoS) integration on all Tier-I retailers has been enforced since 15 December 2019.The online integration of the prescribed registered persons with PoS will be enforced through effective monitoring. FBR is developing IT strategy for this.

The recently launched app “Tax Asaan” will be improved and more features will be introduced to make it user friendly. Introduction of Corporate Income Tax (CIT) reform will result in fewer exemptions and crediting schemes.

The practice of issuing new preferential tax treatments or exemptions will be discontinued so that tax exemptions as a tool for philanthropy and social, investment and export promotion are discouraged.

Exemptions will be phased out except basic food and nutrition items and provisions of health sector. Harmonization between Federal and Provincial taxation regimes is to be achieved by removing duplication of taxation and introducing uniform laws and procedures.

The constitution assigns income taxes (except for agriculture income), the General Sales Tax on goods, customs duties, federal excises, and the capital gains tax to the federal level to be collected by the Federal Board of Revenue (FBR).

While, GST on services, tax on professions, Agricultural Income Tax, Motor Vehicle Tax, Urban Immovable Property Tax, and other taxes related to real estate (e.g. stamp duty, Capital Value Tax) are assigned to the provinces.

This arrangement fragments Pakistan into five tax jurisdictions in the services sector, with consequences such as double taxation, cascading effects of taxes and high compliance burden.

Work on a unified tax portal with standardised forms that will enable taxpayers to file and pay federal and provincial taxes with less cost and compliance time will be completed.

In 2020-2021, FBR will be working on removal of structural anomalies in the taxation regime such as anomalies from SROs (Statutory Regulatory Orders) / aligning certain SROs with the main statute and Rules, Simplified tax returns and forms.

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