On Wednesday, Finance Minister Asad Umar took the floor of the house to present a comprehensive economic reform package aimed at promoting investment and exports in Pakistan.
The package includes several significant incentives and measures designed to stimulate economic growth and provide relief to various sectors of the economy.
Key highlights of the finance minister’s speech include:
1. Withdrawal of Withholding Tax on Cash Withdrawal: In a move to encourage individuals to file income tax returns, the government will withdraw the withholding tax on cash withdrawals for filers.
2. Elimination of Super Tax for Non-Banking Companies: Non-banking companies will no longer be subject to the super tax, providing relief to this segment of businesses.
3. Abolishing Advance Tax on Sale and Purchase of Shares: The advance tax on the sale and purchase of shares will be eliminated, which is expected to boost investment in the stock market.
4. Reduced Income Tax for Banking Companies: Banking companies extending loans to small and medium enterprises, agriculture, and low-cost housing schemes will benefit from a reduced income tax rate of 20 percent.
5. Conversion of Minimum Tax Regime: The minimum tax regime for traders, previously set at 6 percent, has been converted into a final tax regime, simplifying the tax structure for this sector.
6. Taxation on Motor Vehicle Purchases: Non-filers of income tax returns will now be allowed to purchase motor vehicles with engine capacities up to 1300cc, but they will face an increased tax rate.
7. Incentives for Marriage Halls: Marriage halls with an area of 500 square feet will benefit from reduced tax rates, with the tax rate reduced from Rs20,000 to Rs5,000.
8. Trial Project for Tax on Traders: A trial project for taxing traders will be launched in Islamabad, testing a new approach to taxing this segment of the business community.
9. Duty-Free Import of Newsprint: To support the media industry, the government has allowed the duty-free import of newsprint, which is expected to reduce costs for publishers and news organizations.
10. Review of Import Duties on Raw Material: Import duties on raw materials will be reviewed to facilitate the manufacturing sector and reduce production costs.
11. Exemption for Plant and Machinery: The import of plant and machinery for new setups will be exempt from sales tax, customs duty, and income tax, promoting industrial expansion and investment.
12. Abolition of Super Tax for Non-Banking Companies: Effective from July 1, 2019, non-banking companies will no longer be subject to the super tax, further encouraging investment and business growth.
13. Gradual Decline in Corporate Tax Rate: The government will continue to implement a gradual decline in the corporate tax rate, providing relief to businesses over time.
14. Withholding Tax on Sale/Purchase of Shares Abolished: The withholding tax on the sale and purchase of shares in the stock exchange has been abolished, facilitating investment in the capital market. Additionally, carry forward losses for three years have been allowed to further support investors.
15. Customs Duty on High-Engine Capacity Vehicles: To manage the import of high-engine capacity vehicles, customs duties have been increased for vehicles with engine capacities of 1800cc and above.
16. Promissory Notes for Sales Tax Refund: To ease the burden of sales tax refunds, the government plans to issue promissory notes in February 2019.
The economic reform package is a multifaceted effort to stimulate economic activity, encourage investment, and provide relief to various sectors in Pakistan. It addresses issues of taxation, incentives, and import duties, demonstrating the government’s commitment to fostering a favorable business environment and promoting economic growth in the country. The measures announced are expected to have a positive impact on the business community and investors while also supporting economic development and exports.
