The Overseas Investors Chamber of Commerce and Industry (OICCI) has submitted its proposals for the upcoming budget 2023-2024 to the Federal Board of Revenue (FBR).
One of the key recommendations put forth by the OICCI is to increase the threshold for salaried tax exempt income. This proposal aims to address inconsistencies in the current tax structure and alleviate the impact of inflationary pressures on individuals’ disposable income.
READ MORE: PBC terms super tax as penalty on documented sector
The OICCI highlighted that the current salary tax structure is inconsistent with the principle of non-discrimination. For instance, the top marginal personal income tax rate stands at 35%, which significantly exceeds the corporate income tax rate of 29%. Such a disparity goes against the recommendations of the International Monetary Fund (IMF) for maintaining good tax policy.
The unprecedented inflationary pressure and high interest rates have negatively impacted the net disposable income of individual salaried persons. Recognizing this issue, the OICCI proposed an enhancement of the minimum taxable limit from Rs0.6 million to Rs1.2 million. This increase aims to offset the impact of inflation on individuals and provide relief to salaried taxpayers.
READ MORE: PBC proposes exemption of capital gains tax on shares with 10-year holding period
To promote tax parity and fairness, the OICCI recommended aligning the highest slab rate for individuals with the corporate tax rates, which currently stand at 29%. By rationalizing the tax slabs, the OICCI aims to ensure consistency and create a more equitable tax system.
The OICCI suggested granting tax credit for markup paid on house loans under section 64. This measure acknowledges that property purchases through bank or house loans contribute to the documentation of the economy. By allowing tax credits for interest paid on mortgage loans, individuals would be compensated for the burden of high interest rates.
READ MORE: Measures proposed to tackle under-invoicing by commercial importers
Additionally, the OICCI proposed the restoration of tax credit under section 62 for investments in mutual funds and health insurance. This step not only incentivizes fresh investments in the stock market and mutual fund industry but also promotes financial security and well-being for taxpayers.
The OICCI’s proposals for the upcoming budget emphasize the need for tax reforms to address inconsistencies in the salary tax structure and mitigate the impact of inflation on individuals. By increasing the threshold for tax-exempt income, aligning tax rates with corporate levels, and reintroducing tax credits for house loans and investments, the OICCI aims to create a fairer and more supportive environment for salaried taxpayers.
PBC proposes massive tax burden on non-filers in upcoming budget
These measures have the potential to stimulate economic growth, encourage investment, and improve the overall well-being of individuals in Pakistan.
