Pkrevenue.com

Category: Budget

This is parent category of budget presented by Pakistan government. Here you will find year-wise federal and provincial budgets.

  • FBR proposed to reduce import duty on smartphones

    FBR proposed to reduce import duty on smartphones

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce customs duty on import of smartphones for the growth of economy.

    In its proposals for budget 2020/2021 submitted to FBR, the Overseas Investors Chamber of Commerce and Industry (OICCI) said that after the implementation of DIRBS and accompanying tax increase, the smartphone penetration in the country has dropped by 6 percent in the current fiscal year.

    “This is primarily due to the reason that for smartphone, we primarily rely on imports,” the OICCI said.

    Smartphones are not only used for communications but are predominantly used as an enabling tool for internet in almost all segments of the economy including finance, education, health, agriculture, social development etc.

    In the digital ecosystem, availability and affordability of these phones plays a major role in the growth of economy.

    All imported mobile phones including smartphones are now heavily taxed, rendering them unaffordable for vast segment of the population.

    This lack of affordability has become major impediment in proliferation of broadband in the country.

    The OICCI recommended:

    i. Retaining the current tax structure on low-end 2G handsets/feature phones (i.e. Rs. 500 as tax per device)

    ii. Reducing taxes on 3G/4G handsets (smartphones) below Rs. 10,000 and cap it to a max of Rs. 1,000/- per device

    iii. Reducing taxes on smartphones in the higher price brackets and cap it to a max of Rs. 5,000/- per device.

  • FBR urged to abolish withholding tax on telecom services

    FBR urged to abolish withholding tax on telecom services

    KARACHI: Federal Board of Revenue (FBR) has been recommended to abolish withholding tax on telecom services considering the rate is too high and a large segment of people living below poverty line.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 said that currently, telecommunication services in Pakistan are subject to withholding tax at 12.5 percent, which is much higher as compared to other sectors.

    Since approximately 30 percent of the population lives below the poverty line and the percentage of return filers is also nominal, imposition of withholding tax on the entire subscriber base is neither fair nor based on sound principle of proportionate taxation.

    The OICCI recommended the FBR to abolish withholding tax to promote the accessibility of internet/data services to the low-income groups.

    The OICCI also highlighted the issue of sales tax on services applicable in provinces.

    In Punjab, KPK, Baluchistan and Sindh, GST on telecom sector is charged from all consumers at 19.5 percent. In the federal capital, this rate is 17 percent.

    It is pertinent to mention that the provinces are levying a much lower rate of GST on other services – i.e. 13 percent – 16 percent.).

    The OICCI recommended:

    i. Reduce and harmonize GST across the country – i.e. a single rate for all services across all jurisdictions.

    ii. Since GST is a consumption tax on usage, the decrease in GST/FED rate will result in increase in usage of telecom services and consequently drive tax collection upwards.

    iii. A recent GSMA study1 concluded that harmonization of GST on mobile services to 17 percent would yield have an estimated PKR 62 billion positive impact on the GDP and exchequer. Additionally, we can expect 4.5 million more subscribers primarily on mobile broadband, which will be further stimulate GDP growth.

  • Reduction in corporate rate for E&P companies recommended

    Reduction in corporate rate for E&P companies recommended

    KARACHI: Federal Board of Revenue (FBR) has been recommended to reduce the income tax rate for exploration and production (E&P) companies especially in wake of massive reduction in international oil prices.

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  • FBR urged to reduce regulatory duty on lighting fittings

    FBR urged to reduce regulatory duty on lighting fittings

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce regulatory duty on lighting fittings in alignment with LED bulbs and LED tubes.

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  • Uniform tax rate suggested on rental income

    Uniform tax rate suggested on rental income

    KARACHI: The tax rate on rental income should be made uniform for individual, Association of Persons (AOPs) and company at 15 percent.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, recommended to bring uniformity in taxing the rental income.

    The FPCCI said that at present for every person except companies the income from property is chargeable to tax at the rate specified in Division (VIA) of Part I of the First Schedule to the Ordinance, which is considered to be their final tax liability and they are not allowed any expenditure against gross rent, except option provided under sub-section (7) of section 15A of the Ordinance, in case income exceeds Rs.4 Million. Whereas, the companies are required to pay normal tax (current at 29 percent) on such income after adjustment of admissible expenditure out of gross rent.

    The tax rate on rental income has now been gradually increased from 20 percent to 35 percent for individuals and AOPs though the Finance Act, 2019.

    Apart from that the lessor is also required to pay Sindh Sales Tax at the rate of 3 percent to Sindh Revenue Board (SRB), which makes the total tax impact very unfair and exorbitant and lead towards un-documented business.

    The present scheme of taxation on rental income resulted the rents of warehouses had increased exorbitantly and the exporters who warehoused their exportable goods are financially hurt.

    Moreover, it has also distorted the income of the senior citizens, retired persons, pensioners, widows etc., whose livelihood solely depends upon rent of their property, made from their income in good old days.

    The FPCCI made following proposals:

    i) The rental income from property, AOP or individual and company be taxed at a uniform rate of 15% of the Gross Rent as full and final discharge of tax liability.

    ii) Rental income taxable under Normal Tax Regime should be allowed to be adjusted against business loss. The restriction imposed through Finance Act, 2013 needs to be reconsidered.

    Giving the rationales to the proposals, the FPCCI said:

    i) The impact of taxes (direct and indirect) on rental income will be rationalized.

    ii) Investors will be encouraged to declare their genuine rental income.

  • Tariff Policy Board discusses budget proposals

    Tariff Policy Board discusses budget proposals

    ISLAMABAD: The Tariff Policy Board (TPB) on Monday discussed budget proposals submitted by various stakeholders.

    Advisor to the Prime Minister on Commerce Abdul Razak Dawood chaired the meeting.

    The advisor said that the budget proposals, forwarded by different stakeholders, would be given due consideration by the TPB so that economy of the country could be revitalized at this difficult juncture.

    The meeting was attended by the Secretary Ministry of Commerce, Chairperson National Tariff Commission (NTC), Member Customs Federal Board of Revenue (FBR) and other senior officials of the ministries concerned.

    During the meeting, Abdul Razak Dawood emphasized that the maximum benefits would be given to the industry and the lowest strata of society, as per instructions of the Prime Minister Imran Khan, so that maximum job opportunities could be generated in the shortest possible time.

    In the meeting, the tariff related proposals pertaining to different sectors of the economy, for improving the competitiveness of Pakistan’s exports and giving new impetus to the process of industrialization, were discussed at length.

    The recommendations of TPB on tariff structure would be incorporated in the fiscal budget for the year 2020-2021.

    It was decided by the TPB that the meetings of the Sub-Committee of the board would be convened regularly and the recommendations of the Sub-Committee would be placed before the Tariff Policy Board for deliberations and taking informed decisions thereon.

    The next meeting of the Tariff Policy Board will be held by the end of this week.

  • PSX seeks permanent reduction in tax rate for listed companies

    PSX seeks permanent reduction in tax rate for listed companies

    KARACHI: Pakistan Stock Exchange (PSX) has recommended to lower the rate of tax for listed companies in order to encourage listing in the equity market.

    “The tax rate should be permanently lowered for listed companies, by giving tax credit of 20 percent of tax payable for those companies that meet the prescribed requirements including a minimum free float of 25 percent throughout,” the PSX suggested in its proposals for budget 2020/2021.

    The stock exchange said that in order to encourage new listings, the Finance Act, 2011 introduced Section 65C of the Income Tax Ordinance, 2001; whereby tax credit equal to twenty percent (20 percent) for the tax year in which a company opts for enlistment on the Stock Exchange was allowed.

    Currently, the tax credit is given for four years from the date of listing, subject to the condition that for the first two tax years.

    This tax credit is very insignificant and not enough to attract new listings.

    It is generally observed that when companies opt for a listing on a stock exchange, their profits enhance substantially due to effective corporate governance, better disclosures, and availability to additional funds from the market.

    Increased profitability ultimately leads to higher tax revenue for the government as the number of listed companies on PSX grows. Higher listings, coupled with regulations to increase trading activity will result in higher liquidity, and also lead to incremental government revenues from capital gain tax.

    The table below outlines the five-year summary of listing and de-listing on the PSX:

    ParticularsNumber of CompaniesCapital (Rs.)*
    New Listings2462,607 Million
    De-Listings4212,971 Million
    Delisted due to merger9140,535 Million

    *As of December 31, 2019

    Giving rationale to the proposals, the PSX said that It is generally observed that publically-listed companies are able to improve profitability due to effective corporate governance, better corporate disclosure and availability of additional funds.

    The incremental benefits arising from the preferential tax structure for listed companies will foster a business environment that encourages new listings on the stock exchange, resulting in higher trading volumes and lead to:

    a) Higher tax revenue from listed companies’ income as a result of higher corporate profits

    b) Higher revenues from tax on brokers activity on new listings

    c) Higher revenue from Capital Gains Tax on disposal of newly listed securities.

  • FBR proposed to eliminate distortion in withholding tax on dividends from equity investments

    FBR proposed to eliminate distortion in withholding tax on dividends from equity investments

    KARACHI: Federal Board of Revenue (FBR) has been proposed to rationalize of withholding tax on dividends as higher rate from equity investments discourage investment in the capital market.

    Pakistan Stock Exchange (PSX) in its proposals for budget 2020/2021 submitted to Federal Board of Revenue (FBR) said that withholding tax on profit from debt instruments is currently charged a lower rate compared to the withholding tax charged on dividend from equity investments.

    The difference ranges between 2.5 percent – 5 percent. This reduces the incentive to invest in the equity market.

    Tax treatment on various asset classes should not be the primary driver of investment decisions, the PSX said, adding that the profit on debt and dividends should receive the same tax treatment.

    At present, it is observed that corporate profits are first taxed at company level, and subsequently, the resulting profits which are distributed as dividends are taxed at the individual level.

    This is essentially a form of double taxation, and result in the misallocation of capital in an economy by giving an upper hand to fixed income investments.

    To remove this discrepancy, the government should introduce a mechanism to eliminate the distortion on the tax charged on dividends, and make the effective tax rate equal to that on debt.

    Tax rate on investmentsProfit paid is more than rupees five hundred thousandProfit paid is rupees five hundred thousand or less
    Profit on Debt u/s 15115 percent10 percent
    Sukuk-holder (individual or an association of person), if the return on investment is more than one million U/S 150A12.5 percent
    Sukuk-holder (individual and an association of person), if the return on investment is less than one million U/S 150A10 percent
    Dividend U/S 150 & 236S15 percent

    The PSX submitted following proposals:

    i. Government should introduce a mechanism to remove the double taxation of company’s profits – once in the hands of the company, and once in the hands of shareholders as dividends – such that the effective tax rate on dividends is on par with profit on debt.

    ii. Rationalize the current tax rate on dividends to make it equal to the tax rate on profit from debt.

    Provided that there should be no withholding tax on dividend up to Rs100,000 per annum.

    Giving rationale to the proposals, the PSX said that a similar tax treatment on dividend from equity investment and debt instrument will provide a level playing field to equities and attract higher inflows in the stock market. Further, it would lead to increase in numbers of UINs.

    The PSX proposed following proviso should be inserted in section 150 and Section 236S to the Income Tax Ordinance, 2001:

    “Provided that there should be no withholding of tax where amount does not exceed Rs100,000 per annum.”

    Clause (b) Division-I, Part III, First Schedule to the Income Tax Ordinance, 2001, for the word ’15 percent’ shall be substituted by ’10 percent.’

  • PSX proposes reduction of withholding tax on margin financing transactions

    PSX proposes reduction of withholding tax on margin financing transactions

    KARACHI: Pakistan Stock Exchange (PSX) has proposed to reduce the rate of withholding tax in the gross income earned on margin financing transactions to 2.5 percent from existing 10 percent.

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  • FBR suggested to abolish tax refund culture

    FBR suggested to abolish tax refund culture

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish tax refund culture and bring down sales tax at five percent.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021 suggested that the culture of refunds should be abolished and government should collect GST at the rate of 5 percent.

    “It will transfer the benefits to the end consumers which lead the control over inflation and poverty and enhancement in economic activities,” the FPCCI said.

    The apex trade body said that the reduction in the rate of sales tax will enlarge the size of consumer markets and government earnings will definitely increase.

    It will transfer the benefits to the end consumers which lead the control over inflation and poverty and enhancement in economic activities.

    The FPCCI highlighted the present structure of taxation policies in Pakistan.

    Here, it is noteworthy that inducement of private investment particularly foreign direct investment is the only feasible option to develop the badly deteriorated infrastructure in Pakistan.

    Greenfield investment and capitalization of the savings of expatriate Pakistanis are also included in this program.

    FPCCI proposed fiscal policy, while revival strategy will be based on foreign investment. It is unfortunate that tax rates in Pakistan are considered as major hurdle in investment.

    Tax and contribution as percentage of Gross profit is 33.9 percent in Pakistan, while it is 49.7 percent in India, 38.7 percent in Malaysia, 36.6 percent in USA, and 33.4 percent in Bangladesh.

    The average tax rate on corporate sector in Pakistan is 29 percent; it is 25 percent in India, 24 percent in Malaysia, and 21 percent in USA.

    It is important to note that tax system in Pakistan emphasizes on indirect taxes and surcharges. The share of direct taxes in government revenue is around 37 percent in Pakistan, 47 percent in India, 46 percent in Malaysia, 38 percent in UK and 50 percent only in USA.

    The lower share of direct taxes is because of exemptions and less e orts for tax collections from agriculture, services, real estates and retail trading activities.

    This situation leads to dependency on indirect taxes. The indirect taxes hampered the industry in many ways: they increase the cost of production and reduce the demand for manufacturing products, because of higher market prices of those products by inclusion of sales tax. By such a manner, they damage the industrial competitiveness and induce the inflation in economy.

    The FPCCI has recommended the shifting of dependency from indirect to direct taxes. We strongly recommend the reduction rate of sales tax to provide relief to the general public.

    This step will improve the buying power of general public and will help the industry in revival process and accelerate the investment in the country.

    It is extremely important for the survival of Pakistan economy at this stage. The reduction in the rate of GST is proposed on the basis of expected enhancement in revenue because of enhanced economic activities.

    To increase its revenue government should not depend on indirect taxation. This approach leads the poverty and inflation. We should encourage revenue enhancement through direct taxation on equity and egalitarian basis.

    Tax should be paid according to the magnitude of earning regardless the source of earning.

    To accelerate economic activities and improving efficiencies, the FPCCI suggests reduction in the rate of GST.

    This is the pivotal point of our taxation policy. A solution of containing the ongoing unsettled business environment is imperative. The present ongoing conflicts and contradictions has reduced the sales and as well as have chocked the sales points and agents of sales. The re-initiation efforts of FPCCI towards saleable policy objective of fixed sales system may find a substitute of settlement of ongoing disputed business environment.

    The reduction in the rate of sales tax will enlarge the size of consumer markets and government earnings will definitely increase. The sources of FBR have been indicating the effective tax rate of GST is less than 5 percent, which indicate that 71 percent of total collection of sales tax has to pay back in account of input adjustment and refund claims.

    The FPCCI in 2014 took-up a subject of fixed sales tax regime, which attended the influence level and even the then Finance Minister conceded to consider the same during his tenor as the document, submitted by FPCCI, concluded towards the objective that the collection would increase and not decrease by promoting business conducting environment through fixed sales tax regime.

    This will provide demand supported production environment for manufacturing. It will improve the collections and settle the disputed business environment.