ISLAMABAD: The Senate of Pakistan has recommended the government to abolish withholding tax on cash transactions from banks. In its key tax recommendations for finalizing budget 2020/2021, the Senate recommended that the government should abolish all kinds of withholding tax chargeable on cash transactions from banks.
(more…)Category: Budget
This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.
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Senate advises salary increase by 10 percent
ISLAMABAD: The Senate of Pakistan has recommended increase in salary of government employees by at least 10 percent for fiscal year starting July 01, 2020.
As per the general consensus recommendations of the upper house after the debate on budget 2020/2021, it is recommended that salary of government employees should be enhanced at least 10 percent.
The upper house further recommended that the federal government should double the budget for education and health sectors.
It is recommended that all important debt agreements must be placed before the parliament for scrutiny immediately.
The budget allocation for ministry of national health services, regulations and coordination must be enhanced to a minimum five percent as per WHO recommendations.
The 11 percent cut imposed on the share of the provinces in violation of National Finance Commission (NFC) Award must be revised immediately.
The Senate of Pakistan recommended to the National Assembly that the allocation for Ministry of Education must be increased by 20 percent.
It is recommended that salaries of the medical and para-medical staff working in ICT should be enhanced reasonably.
The Senate recommended that the government should allocate more funds for management of rain water reservoirs. A special fund should also be allocated for construction of new small/mini dams.
Budgetary allocation of Higher Education Commission (HEC) should be enhanced to Rs100 billion.
The upper house recommended that the government should allocate funds for improvement in the aviation sector and to upgrade airports all over the country.
The government should expedite the process of loss making projects in a transparent manner.
The government should raise the amount of funds allotted for locust control in 2020/2021, from Rs4 billion to Rs8 billion keeping in view of the losses suffered by small farmers in locusts affected areas.
It is recommended to raise at least 50 percent in the corona stimulus package for fertilizer subsidy, loan remission and other relief to the farmers, keeping in view of covid-19 situation and food insecurity on account of locusts attacks.
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Senate recommends tobacco must be treated as crop, exempted from duty/taxes
ISLAMABAD: The Senate of Pakistan has recommended a significant policy shift, advocating for tobacco to be treated as a crop and exempted from duties and taxes. This recommendation was made in the context of the Finance Bill 2020, reflecting the upper house’s stance on the agricultural status of tobacco.
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Tax collection target of Rs4.96 trillion for 2020/2021 achievable
ISLAMABAD: Hammad Azhar, Minister for Industries and Production, has said that the tax collection target of Rs4.96 trillion assigned to Federal Board of Revenue (FBR) during next fiscal year is achievable.
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Banks to provide information of all recipients of profit on debt
In a decisive move to bolster transparency in financial transactions, the Federal Board of Revenue (FBR) is set to require all banks to provide detailed information on individuals receiving profit on debt, effective from July 1, 2020.
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Tax deduction allowed on salary up to Rs25,000 paid in cash
KARACHI: The Finance Bill 2020 has proposed major changes related to tax deduction in order to provide relief to business community. Under the proposed amendments the threshold amount has been increased up to Rs25,000 for tax deduction in case salary is paid.
According to interpretation of the Finance Bill 2020 by BDO Pakistan, the Finance Bill proposed amendments to Section 21 of the Income Tax Ordinance, 2001.
(l) The Bill seeks to enhance threshold of deduction for cash payment against business income under single account head from Rupees fifty thousand to Rupees two hundred and fifty thousand per annum.
This proposal seeks to relieve businesses from making transactions through banking channel, as it is difficult for business to make every transaction through banking channel.
Further The Bill seeks to increase the threshold of expenditure liable to be disallowed as a business expense if the same is not made through a crossed banking instrument/ online transfer of payment from Rs.10,000/- to Rs.25,000/ per transaction.
Furthermore, The Bill seeks to enhance threshold from Rs.15,000/- to Rs.25,000/- as allowable deduction against business income if the salary is paid in cash.
(p) & (q) The Bill seeks to add two new clauses to regulate limit of expenditure on account of utility bill and sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 as an admissible deduction against business income where sales equal to or exceed Rs. 100 million per person. However, the disallowance of expenditure shall not exceed 20 percent of total deduction claimed.
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Exemption from withholding tax on foreign remittances may not practical for banks
The Pakistani government has announced a significant tax relief measure, granting withholding tax exemption on the transfer of foreign remittances to Pak Rupee (PKR) accounts. However, tax experts have raised concerns about the practical implementation of this exemption, particularly regarding the bifurcation of transactions for banks.
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Restoration of multiple years audit to burden taxpayers
KARACHI: Business community has criticized the government for eliminating condition of conducting audit once in three-year period.
Overseas Investors Chamber of Commerce and Industry (OICCI) highlighted anomalies in the Finance Bill 2020, sent to the Federal Board of Revenue (FBR) and said that omission of the condition would burden the taxpayers and would give sweeping powers to tax officials.
The Finance Act 2018 restricted the frequency of conducting audits to once in a three-year period.
This amendment of 2018 demonstrated the confidence of the Government on the records maintained by registered persons.
The Bill now seeks to omit the condition of conducting the audit once in a three-year period. If passed, this will unnecessarily burden taxpayers, while handing over sweeping powers to the assessing officers of Inland Revenue to conduct audits covering one or multiple tax years with no reprieve for the taxpayer available under the law, in absence of any prescribed limitation.
The consequence of this change will likely erode the taxpayer’s confidence in the revenue machinery and the probable unnecessary wastage of time and effort by the revenue authorities.
The OICCI said that during the FBR/OICCI Web link meeting on May 5th the FBR Member (IR-Operations) informed that new Audit Policy will be announced soon, where there will be only one audit in three years u/s 122, which was welcomed by OICCI members.
Therefore the removal of condition of one audit in three years in the Finance Bill 2020, is a shock for OICCI members.
“Hence, we strongly advocate maximum of one for audit within three years, for promoting Ease of Doing Business,” the OICCI said.
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Foreign investors express concerns on proposed rates for imported raw materials
KARACHI: Foreign investors have raised concerns over the proposed tax rates on import of raw materials.
Overseas Chamber of Commerce and Industry (OICCI), which is represented of foreign investors and multinational companies in Pakistan, highlighted anomalies in the Finance Bill 2020 and proposed rectifications.
The OICCI said that the reduction in rate of income tax u/s 148 to 2 percent on import of raw materials/items mentioned in Part II of the Twelfth Schedule is a significant relief that will improve the cash flow position of companies.
However, two concerns have been voiced on the changes proposed:
a) The Bill seeks to introduce a new Schedule as the Twelfth Schedule to the Ordinance wherein all the goods imported into Pakistan may be classified under either of the three categories viz Part I, Part II and Part III based on PCT code wise listing of goods.
However, certain core raw materials used by manufacturers are still falling under the category of 5.5 percent income tax by virtue of non-inclusion in Part II of Twelfth Schedule.
It is suggested that a general rate of 2 percent may be prescribed for all imports by manufacturing companies for own consumption.
b) The Bill now seeks to omit Clause 72B, therefore, exemption would no longer be available in respect of tax collected under Section 148 of the Ordinance to an industrial undertaking.
Though there is substantial reduction in rate of collection of tax, as a result of withdrawal of such exemption, nevertheless, the taxpayer operating on margins lower than the rate of advance tax collected on imports or having adjustable losses/tax credits or enjoying tax exemption may still face liquidity hitches.
In order to avoid cash flow issues and tax refundable situation, it is suggested that instead of omitting clause 72 B, industrial undertakings importing raw materials for in house consumption should be provided an option.
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Senate committee rejects taxpayers profiling, real-time access to information
ISLAMABAD: The Standing Committee on Finance, Revenue and Economic Affairs, in a meeting, has rejected new clauses of taxpayers profiling and real-time access to information.
The committee strongly rejected the amendments to the taxpayers profile, appeal to appellate tribunal, offences and penalties and power to enter and search premises.
Clauses related to real time access to Information and databases have been disapproved as well, said a statement.
The standing committee meeting was held last week took up the Finance Bill 2020, containing the Annual Budget statement presented in the House on 12 June, 2020. Review of the Income Tax Ordinance, 2001 and Federal, Excise Provisions of Finance Bill, 2020 was completed.
Amendments recommended by the Committee in the Public Finance Management Act 2019 were carried out and shared with the Committee.
Chaired by Senator Farooq Hamid Naek, the meeting was attended by Senator Mohsin Aziz, Senator Zeeshan Khanzada, Senator Musadik Masood Malik, Senator Mian Muhammad Ateeq Sheikh, Senator Senator Talha Mehmood, Senator Ayesha Raza Farooq, and senior officers from the Ministry for Finance, Revenue and Economic Affairs, Ministry of Commerce and Federal Board Revenue.
The Committee deliberated over Restriction on deduction of profit on debt payable to associated enterprises. Agreements for the avoidance of double taxation and prevention of fiscal evasion were discussed as well.
Special concessions have been awarded to items that are essential during COVID 19 Pandemic.
The Committee appreciated the measures taken by the FBR to deal with vast consequences of the Pandemic. Omission of collection of advance tax from dealers, commission agents and arhatis etc., by market committees was welcomed.
This is an important measure to promote agriculture in the country.
Advance tax on education related expenses has been omitted as well.
In an attempt to discourage the use of caffeinated drinks FED has been increased from 13 percent to 25 percent.
Imported cigarettes, cheroots, cigarillos, cigars of tobacco and tobacco substitutes have been subjected to FED at 100 percent.