ISLAMABAD: The government has decided to impose regulatory duties on luxury and non-essential items and announce an incentive package to bring evaders under the tax net to bridge shortfalls in revenue collection.

Imports of luxury items have gone up over the past few months and Finance Minister Ishaq Dar is not happy with the trend.

Mr Dar briefed the National Assembly’s Stan­ding Committee on Finance and said the substantial increase in imports of luxury items was a worrisome factor for the government and he was working on various proposals to curtail them.

Also read: Dar reviews steps to achieve revenue target

The Federal Board of Revenue has come up with a detailed package to generate revenue and the prime minister has approved it.

The IMF has proposed Rs40bn revenue measures for bridging the revenue shortfalls.

Incentive package to bring evaders under tax net likely

The FBR proposal will have to be approved by the Economic Coordination Committee of the cabinet. The ECC meeting was scheduled for Friday, but it had now been postponed, an official in the finance ministry told Dawn.

A source told Dawn that as per the FBR proposal the government had decided to increase regulatory duty on 287 items, mostly processed eatables, from 10pc to 15pc; from 5pc to 10pc on 14 items; from 15pc to 20pc on around 15 items and from 20pc to 25pc on other products.

It has also decided to withdraw income tax exemptions and increase federal excise duty on a few products including cigarettes.

The income tax measures are expected to be promulgated through a presidential ordinance.

Mr Dar justified the decisions by saying that Pakistan could not get benefits of the low oil prices because there was a considerable increase in imports of luxury items. He said the State Bank of Pakistan has also expressed concern over the rising import bill despite low oil and commodity prices in the international market.

The finance minister said the government was willing to offer fixed scheme for income tax non-filer traders to bring them under the tax net. He said he was also willing to create a special block for dealing with the new taxpayers to be brought under the new scheme.

The deadline for deduction of withholding tax on banking transactions at reduced rate of 0.3pc will expire on Nov 30. “We expect to reach an agreement with traders on the scheme to make it effective from next month,” Mr Dar said.

He said non-filer traders would be divided into three to four categories for payment of fixed amount of tax starting from Rs10,000 per annum with a subsequent increase in coming years. The audit department would not bother them for the next couple of years.

The business community has claimed that the imposition of withholding tax had affected around 12 million people, but the minister said he would be happy if 4m to 5m of them came under the tax net.

Mr Dar said the tax amount would be fixed on the basis of categories of traders. ‘A’ category would cover big cities like Karachi, Lahore and Rawalpindi, ‘B’ comparatively medium size cities and ‘C’ and ‘D’ small cities.

The minister expressed the hope to reach an understanding with traders because they were more concerned with the whitening of capital.

“We are ready to facilitate businessmen and resolve their issues based on sectors as well.”

He said the government would create a separate block for around 4m new taxpayers. The filling of returns and payment of tax in December would be higher because of the proposed package, he added.

Published in Dawn, November 27th, 2015