FBR estimates Rs50 billion income tax loss from salary

FBR estimates Rs50 billion income tax loss from salary

The Federal Board of Revenue (FBR) has recently presented a comprehensive revenue position to the finance ministry, highlighting an estimated loss of Rs50 billion resulting from the downward revision of tax rates on salary income.

The significant changes in tax policies were introduced through the Finance Act, 2018, Finance Supplementary (Amendment) Act, 2018, and Finance Supplementary (Second Amendment) Act, 2019. The focal point of concern revolves around the reduction in tax rates on salary income, accompanied by an increase in the threshold from Rs.400,000 to Rs.1,200,000.

The FBR noted that these alterations had a considerable impact on the withholding taxes collected by various government and private withholding agents. In particular, the withholding tax revenue saw a substantial decrease as a consequence of the changes implemented in the Finance Act, 2018.

According to the FBR, the revenue impact of this alteration amounted to Rs.32.4 billion during the period from July 2018 to February 2019. Furthermore, projections indicate that the total revenue loss due to this tax revision is expected to reach approximately Rs.50 billion in the current fiscal year.

The reduction in tax rates and the elevation of the income threshold were implemented with the intention of providing relief to salaried individuals. However, the unintended consequence has been a substantial decrease in the revenue collected through withholding taxes.

The Finance Act, 2018, was aimed at creating a more equitable tax structure by lowering the burden on salary income earners. The increase in the income threshold was designed to ensure that a larger segment of the population would benefit from reduced tax rates. Nevertheless, the FBR’s latest estimates suggest that the revenue implications of these changes have been more significant than anticipated.

The FBR’s report raises questions about the trade-off between providing relief to taxpayers and maintaining a steady stream of revenue for the government. As the country faces economic challenges, striking a balance between supporting taxpayers and ensuring sufficient revenue collection becomes a delicate task for policymakers.

In response to the findings, stakeholders and economic analysts are urging a careful review of the current tax policies. Some argue that a balance must be struck between providing relief to taxpayers and ensuring the government has the necessary resources to meet its financial obligations.

The finance ministry, upon receiving the FBR’s detailed report, is expected to evaluate the implications of these tax revisions and consider potential adjustments to address the revenue shortfall. As the fiscal year progresses, the government will likely face the challenge of finding the right equilibrium between facilitating taxpayers and sustaining a robust revenue base to support essential public services and development initiatives.

One thought on “FBR estimates Rs50 billion income tax loss from salary

  1. Please forgive salaried class income tax and only consider benami account and take out money from top civilian and big shots and recover the money from them. This is the only solution.

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