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Tag: budget 2019-2020

  • Budget 2019/2020: salary, pension increased up to 10 percent

    Budget 2019/2020: salary, pension increased up to 10 percent

    ISLAMABAD: The government has announced increase up to 10 percent in salary and pension in the federal budget 2019/2020.

    Hammad Azhar, State Minister for Revenue presented Budget 2019/2020 on Tuesday and announced following relief measures for government employees and pensioners.

    Ad-hoc Relief Allowance at 10 percent on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces Civil employees BPS 17 – 20 will be given ad-hoc Relief Allowance at 5 percent.

    Civil employees in BPS 21 and 22 will receive no increase in pay as they have decided to sacrifice for the sake of improvement in economic situation of the country.

    Increase in net pension at 10 percent will be given to all civil and armed forces pensioners of federal government.

    Special conveyance allowance for disabled employees will be enhanced from Rs.1,000 per month to Rs.2,000 per month.

    Special pay admissible to SPS/PS/APS to Ministers, Ministers of State, Parliamentary Secretaries, Additional Secretaries, and Joint Secretaries will be enhanced by 25 percent.

    In addition to the above, minimum wage is being increased to Rs.17,500 per month.

  • Budget 2019/2020 at glance

    Budget 2019/2020 at glance

    ISLAMABAD: Following is the glance of budget 2019/2020.

  • Budget 2019/2020 with massive tax burden presented

    Budget 2019/2020 with massive tax burden presented

    ISLAMABAD: The present government on Tuesday presented its first budget with total outlay of Rs 7,022 billion for the fiscal year 2019-2020, registering growth of 30 percent against the revised budget of Rs 5.385 trillion for current fiscal year (2018-2019).

    State Minister for Revenues Hammad Azhar presented the budget in the National Assembly, amid protest by the Opposition parties.

    The minister said that total federal revenues have been estimated at Rs 6,717 billion which is 19 percent higher than the previous year’s revenues of Rs 5,661 billion.

    The collection of revenues by Federal Board of Revenue (FBR), he said are estimated to be recorded at Rs 5,555 billion which are 12.6 percent of Gross Domestic Product (GDP). In order to achieve the revenue collection target the government introduced massive budgetary measures across the board.

    The minister of state said out of total revenue collections, an amount of Rs 3.255 trillion would be distributed among the provinces under 7th National Finance Commission (NFC) Award which is 32 percent higher than the current year’s share of Rs 2.465 trillion.

    He said Net Federal Revenues for the upcoming fiscal year have been estimated at Rs 3.46 trillion against the revenues of Rs 3.07 trillion during current fiscal year which is 13 percent higher.

    Similarly, he said the federal budget deficit would be Rs 3.56 trillion whereas the provincial budget surplus is estimated to be at Rs 423 billion for the year 2019-2020.

  • FBR to force all NTN holders for filing tax returns

    FBR to force all NTN holders for filing tax returns

    ISLAMABAD: Federal Board of Revenue (FBR) has chalked out a comprehensive plan to broaden the tax base by enforcing tax returns in the case of all National Tax Number (NTN) holders.

    According to Economic Survey 2018/2019 released on Monday said that the FBR would take following measures to broaden the tax base:

    — Creation of a central data bank

    — Enforcement of return in the case of all NTN holders

    — Preparation of directory of non-filers deductees

    — Data to be obtained from NADRA, Telecom Cos, Banking Cos, Development Authorities, Schools, Clubs, Hotels etc

    — Data of suppliers/buyers of sales tax returns of 5,000 big companies

    — Raising expenditure on revenue collecting machinery from 0.8% to 1.5% of total revenue

    — Registration of persons subjected to withholding of sales tax

    — Registration of retailers under the new scheme introduced under Special Procedure Rules.

    — Deployment of Technology to Identify Risk Areas to Support Risk Based Audit

    It said that an audit plan has been reintroduced to accompany the self-assessment scheme and to overcome weak tax compliance.

    Substantial progress has been achieved for infrastructure upgradation and development with the introduction of the fully Inland Revenue Information System (Iris), which is available to all the field formations.

    A paradigm shift from simple random selection to Parametric Computer Ballot selection of cases and finally risk based selection in audit has been introduced. Moreover, litigation against General Audit Policies was successfully defended before different Courts of Law.

    Under the reform initiatives, Draft Audit policy for the Tax Year 2017 is under consideration and will be finalized after due deliberation/consultation with all concerned.

    Moreover, Risk-based Audit Framework is being devised to ensure a more targeted and focused approach with the help of World Bank. Training modules have been prepared to import Investigative Audit Training to officers with the help of World Bank.

    In order to promote tax culture, compliance and to dispel the general impression about evading taxation by individuals having prominent position in the society, FBR has under taken following initiatives for bringing a behavioral change regarding the tax culture perception in the society:

    a) Publishing Tax Directory of Parliamentarians

    b) Establishment of Financial Investigation Cell

    c) Campaign against Tax Evaders

    To simplify procedures and minimize contact between the taxpayers and the tax collectors, FBR management has made revolutionary changes in automation of tax procedures. Major achievements include:

    i. Web Based One Customs (WeBOC) System of Clearance

    ii. EDI – Electronic Data Interchange

    iii. National Single Window (NSW)

    iv. iv. Inland Revenue Information System (Iris)

    Current initiatives

    − Creation of Tax Policy Unit within Ministry of Finance

    − Identification and scrutiny of evasion by High Net worth Individuals

    − Administrative measures to increase tax collection by identifying untaxed wealth overseas and by data matching to identify non-filers

    − Practical steps taken to curb Offshore Tax Evasion (UK and UAE properties, Panama and Paradise Leaks, etc.) and continuous monitoring of such cases

    − Plaza Mapping at Lahore, Karachi and Islamabad

    − Launch of Device Identification, Registration and Blocking System (DIRBS) to control smuggling of mobile devices

    − Introduction of Currency Declaration System and Advanced Passenger Information System at major airports of the country

    − Discouraging imports of luxurious goods through additional Regulatory Duties (RDs)

    − Addressing under invoicing by signing MOU with China for exchange of pricing information

    − Forensic audit in Sugar, Tobacco and Steel Industries to address leakages and tax evasion and in these industries

    − Implementation of Tobacco Track & Trace System

    − Resolving pending litigation

    − Collection of pending arrears identified as collectable arrears

    − Resolving 1.2 million automatically selected cases for audit U/s 214D

    These reforms will start paying dividends in shape of improved compliance, higher revenue growth and improvement in tax-GDP ratio.

    The tax revenues have increased significantly during last four years. The collection jumped from Rs 1,946 billion in FY2013 to Rs 3,844 billion in FY 2018, registering an overall growth of 97.5 percent.

    Similarly, tax-GDP ratio of the country which was just 8.7 in FY2013 jumped to 11.1 in FY 2018.

    With the help of these initiatives, FBR is moving towards a more efficient tax system; facilitating taxpayers, promoting investment and broadening the tax base in the years to come. It is envisioned that these resource mobilization efforts will result in further improvement of domestic tax revenues in coming years.

  • National Savings to issue registered prize bonds in all denominations

    National Savings to issue registered prize bonds in all denominations

    ISLAMABAD: The Central Directorate of National Savings (CDNS) to issue scripless registered prize bonds amongst all denominations with objective to document the economy.

    Economic Survey 2018/2019 released by the finance ministry of Monday, said that in collaboration with SBP, National Savings is in the process of introduction of registered scripless prize bonds amongst all denominations.

    The registered prize bonds will be a step towards documentation of the economy while providing facility to the general public.

    The CDNS remained in the process of restructuring and transformation in the Fiscal Year 2019. In this regard, the achievements made in the first nine months and initiatives in the pipeline are as under:

    IT Transformation:

    Starting from 2002-03, National Savings has gone a long way towards computerization and automation of its processes.

    Out of 375 National Savings Centers (NSCs), 222 have been computerized. In the last one year, some more milestones have been achieved for transformation of the organization into an Information Technology enabled entity.

    i. A data center has been established at National Telecommunication Corporation (NTC) and now 205 NSCs are connected to centralized location through Wide Area Network (WAN) whereas NTC is working for provisioning of connectivity at remaining NSCs.

    ii. CDNS Main Application System has been upgraded into state-of-the-art Business Application Solution and deployed at 35 National Savings Centers while remaining NSCs are in the process of migration to the centralized architecture by using the newly upgraded Business Application Solution. The aforesaid achievement has enabled CDNS for provisioning of advance, efficient and value-added services to its customers using Alternative Deliver Channels (ADCs) i.e. Debit/ATM Cards, etc.

    iii. Protocols have been laid down with National Database Registration Authority (NADRA) for obtaining Verisys and Biosys, which are necessary in the new digitized set up of the organization.

    iv. Vendor has been selected for providing the card (ATM/Debit Card) solution for CDNS.

    v. Agreement with 1Linkhas been signed for providing connectivity with banking sector/ATM operations.

    Achievement of Annual Targets:

    CDNS, being the foremost institution providing the avenue to general public to park their savings has been able to not only achieve the targets assigned but also surpassed by a big margin. As of 30.04.2019, the CDNS has achieved 213 % of the Gross and 191% of proportionate targets.

    Initiatives in the Pipeline:

    Sharia Product of National Savings

    There was a persistent demand of Sharia compliant product and CDNS has responded to it and has developed its first-ever Sharia Compliant product called Sarwa Islamic Savings Account (SISA) for those who desire to invest only in the Sharia-compliant scheme of CDNS. The Draft rules for it have been printed in the Gazette of Pakistan and after approval of the Cabinet Committee for Disposal of Legislative Cases (CCLC) and the Federal Cabinet, the proposed SISA Scheme will be introduced across the country.

    Overseas Pakistanis Savings Certificates (OPSCs)

    The Pakistani diaspora abroad wanted to have a secure investment channel for their savings while Government of Pakistan, in order to increase more also looked for bringing remittances into formal money channels which were mostly coming via informal channels. In this regard, to fill the void, OPSCs has been designed as a product by CDNS to be launched for Overseas Pakistanis only. It will be launched initially in the Gulf Cooperation Council (GCC) market and then other countries. The Agreement with Manger To the Issue (MTI) has been almost finalized. Being a scripless security, OPSCs will be offered in both the US$ and rupee currencies. It is expected that they will be launched in the Fiscal Year 2019-20.

    Launch of Rs. 100,000 Premium Prize Bond (Registered)

    After successful launch of Rs.40000, Premium Prize Bond (Registered) National Savings is in the process of launching another registered prize bond for Rs. 100,000

    Debit Card Launch & Membership of 1Link System

    In near future National Savings is launching ATM Debit Cards with the support of the Karandaaz Pakistan.

  • Rs10 billion may be allocated for agri projects in budget 2019/2020

    Rs10 billion may be allocated for agri projects in budget 2019/2020

    ISLAMABAD: The government has decided to allocate record amount for agriculture growth in fiscal year 2019/2020, sources said on Monday.

    The sources said that the government may allocate around Rs10 billion to National Food Security and Research for 24 new development projects.

    While an amount of Rs1.39 billion likely to be allocated for the ongoing projects.

    An amount of Rs1.5 billion may be allocated for the expansion of small and medium dams. In order to improve water resources in the country an amount of Rs5.5 billion to be allocated.

    Other projects in the agriculture sector may be included:

    — Rs50 million for poultry industry;

    — Rs150 million for fish catch culture cluster development period;

    — Rs400 million for improving water resources in KPK

    — Rs500 million for national oil seed programs

    — Rs350 million for wheat output growth

    — Rs200 million for sugarcane output

    — Rs450 million for growth in rice product

    In the last fiscal year an amount of Rs1.8 billion was allocated for National Food Research and Security.

  • PTBA proposes withdrawal of restriction on input claim under Sindh sales tax

    PTBA proposes withdrawal of restriction on input claim under Sindh sales tax

    KARACHI: Pakistan Tax Bar Association (PTBA) has urged the Sindh government to withdraw the restriction on claiming input tax by services rendered by a taxpayer.

    The apex tax bar in its proposals for Sindh budget 2019/2020, said that no input tax is allowed to be claimed on goods or services acquired prior to six months preceding the date of commencement of the provision of taxable services by a taxpayer.

    It is recommended that such restriction should be eliminated.

    That any bar on admissibility of input tax borne by the taxpayer prior to six months preceding the commencement of provision of taxable services is against the basic principal of Value Added Tax (VAT). It is also not justifiable in case of a long term projects.

    Any assessment order can be amended by a tax officer on the basis of any subsequent information, etc. Such powers are arbitrary and unjust and may open the doors for harassment and corruption, the tax bar said.

    Therefore it is recommended that the taxpayer should first be confronted with a show-cause notice with substantial reasons and definite information/evidence(s) that warrant reopening or amending the assessment order.

    Further, the powers to amend any assessment order should only be vest with the Commissioner or Board only.

    This recommendation would introduce transparency in the tax system for revision of shut and close transactions and provide justice to the taxpayer.

    Highlighting another issue, the PTBA said that the taxpayer is required to retain records for a period of 10 years and show-cause notices may be issued within a period of 8 years from the date of relevant tax period.

    “This is in excess of the statute of limitation provided under the STA and ITO. It will not only put excess burden on the taxpayer, but also dis-incentivizes the tax authorities from taking timely action.”

    The time period for retention of records and assessment of tax should be reduced to 5 years.

    This would save taxpayers from practical difficulties and unnecessary burden while pushing the tax authorities to take more timely action.

    In another proposal, the PTBA said that the tax officer is empowered to ask for any information from a taxpayer without specifying the reason or nature of the case being investigated by him.

    Scope of Section 52(1) should be restricted to specific parties and transactions which are within the jurisdiction of Sindh and are specifically identified by the tax officer instead of fishing and roving enquiries.

    This promotes equity and natural justice and avoids harassment and unnecessary proceedings.

    At present the Sindh Revenue Board (SRB) may arbitrarily empower a Deputy Commissioner to exercise the powers of Commissioner (Appeals).

    This provision should be deleted. Such an amendment undermines the quasi-judicial function and weakens the judicial process by empowering a junior ranked officer to assume the powers of a quasi-judicial authority.

    At present recovery of demand can be initiated at any time after the assessment order is issued.

    Since an appeal may be filed within 30 days from the date of receipt of an assessment order, the recovery proceedings should not be initiated within such time.

    This recommendation would harmonize the Federal and Provincial tax laws.

    The PTBA said that a lot of services mentioned in the First Schedule are without H.S. Code/Tariff Headings which may create difficulties.

    It is suggested that all services should be marked with the respective Tariff Headings in order to avoid confusions on the part of assessing authorities as well as the registered persons.

    This recommendation would bring clarity, equity and harmony in the tax laws.

  • Proposals for budget 2019/2020 finalized; salary persons may get increase; rise in additional customs duty likely

    Proposals for budget 2019/2020 finalized; salary persons may get increase; rise in additional customs duty likely

    ISLAMABAD: The ministry of finance has finalized proposals for budget 2019/2020 and will get approval from the Cabinet before presenting in the Parliament on June 11, 2019.

    Prime Minister Imran Khan will chair the cabinet meeting on Monday in which the budget with record deficit will be approved.

    The sources said that the cabinet would approve budget with estimated Rs3,000 billion deficit.

    According to the proposals, the budget allocation for the defence would be around Rs1,250 billion, which will less than the allocation for the outgoing fiscal year.

    An amount of Rs2,500 billion has been proposed for the payment of interest on the loan, the sources said.

    The government may allocate Rs925 billion for the federal development expenditures.

    The Federal Board of Revenue (FBR) may be assigned Rs5,500 billion as tax target for the fiscal year 2019/2020. While, the estimated earning from non-tax revenue may be at Rs1,250 billion.

    The tax proposals would include:

    Sales tax on sugar would be increased from 17 percent from existing 8 percent.

    Income tax has been proposed on the earning of middle-man.

    Increase in duty and taxes has been proposed poultry, electron and several other items.

    Increase in additional customs duty is recommended from 2 percent to 3 percent.

    Abolishing zero rating for five export sectors is also part of proposals. It is worth mentioning that the prime minister has already announced to abolishing subsidy to zero-rated sector.

    The government likely introduce soft loan program for youth. An amount of Rs5 billion would be allocated for establishing agriculture institute.

    Decrease in fertilizers prices would be recommended.

    The government employees and pensioners may get increase of 10-15 percent. The proposal of increasing pay and pension would get approval at the cabinet meeting.

  • Profit on banking deposits: High tax rate planned for non-filers in budget 2019/2020

    Profit on banking deposits: High tax rate planned for non-filers in budget 2019/2020

    ISLAMABAD: A sharp increase in withholding tax rate (may be up to 30 percent) on profit on banking deposits has been planned for non-filers in order to make it almost impossible to stay remain unregistered, sources said.

    Sources told PkRevenue.com that Federal Board of Revenue (FBR) a large sum of banking system deposits were remained undocumented resulting large number of people out of tax net and massive tax evasion.

    Under Section 151 of Income Tax Ordinance, 2001 the withholding tax rate on profit on debt for filers is 10 percent with no limit on earned amount and 10 percent for non-filers up to Rs 0.5 million. However, 17.5 percent withholding tax rate for non-filers driving profit on debt above Rs0.5 million.

    The sources said that the tax rate for non-filers driving profit on debt above Rs0.5 million may be increased to 30 percent.

    According to State Bank of Pakistan (SBP) the total deposits of the banking system reached to all time high of Rs13.456 trillion by March 2019.

    The sources said that the proposed increase in profit on debt would force the people having undocumented or black money parked in the banking system to file their returns in order to reduce the tax impact.

    In return, the sources said, the FBR would get information of people having large amounts in the banking system.

  • Massive cut in tax exemptions, concessions likely in budget 2019/2020

    Massive cut in tax exemptions, concessions likely in budget 2019/2020

    ISLAMABAD: The government has planned to a massive cut tax in exemptions and concessions in the budget 2019/2020, which is scheduled to be announced on June 11, 2019.

    Sources told PkRevenue.com that the government had committed with the World Bank and other international agencies to withdraw large size exemptions given to various sectors and individuals in order to boost revenue collection, especially in the wake of difficult economic situation.

    The sources said that the Federal Board of Revenue (FBR) had already initiated policy making and would introduce phases to withdraw available tax concessions and exemptions.

    According to Pakistan Revenue Mobilization Program funded by the World Bank, the FBR had already launched several initiatives including ongoing review of tax policy to formulate a medium-term tax policy framework and propose measures to reduce tax expenditure for the budget 2019/2020.

    The cost of tax exemptions and concessions in the fiscal year 2017/2018 was around Rs541 billion, which included: income tax Rs61.78 billion; sales tax Rs281 billion; and customs duty Rs198.15 billion.

    The sources said that in the first phase around 50 percent exemptions and concessions would be withdrawn in the budget 2019/2020.

    The World Bank on Pakistan report said multiple exemptions and discounted rates to select industries, economic actors, and economic activities (e.g. sugar, textiles, and fertilizer industries; ‘associations’ in the real estate sector; imports for infrastructure projects under the China-Pakistan Economic Corridor) are granted in each year’s budget law, which distort competition and economic actors’ incentives. In FY2017/18, Pakistan’s tax expenditure (i.e., tax revenue foregone due to exemptions and concessional rates) was estimated at 2 percent of GDP, primarily due to exemptions from General Sales Tax (GST) and customs duties.

    “Substantial exemptions also apply to property taxes, whereby properties below a certain size are exempted regardless of location, while revenue is also lost due to unrealistically low valuations used for taxation purposes.”

    The Capital Gains Tax (CGT) returns negligible receipts due to the zero rate applied to capital gains from the sale of immovable property after more than four years of ownership, and rates of 5-10 percent for properties sold after one to four years of ownership, the report said.

    The present PTI-led government has issued a roadmap for stability, growth and productive employment issued in April 2019 and stated that tax policy has to balance the revenue objective with equity and growth objectives.

    Presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

    In addition, even the revenue objective is compromised by large scale exemptions. To correct this shortcoming, the government intends the following:

    i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption.

    ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions.

    iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

    iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

    v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament.

    vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law.