ISLAMABAD: The government has decided, in principle, to reverse the drastic tax relief provided to the salaried class in its proposed federal budget for 2022-23, official sources told Dawn.

In the recently presented budget, the government had unexpectedly given major relief in terms of tax rates to individuals with higher salaries by reducing the maximum tax rate from 35pc to 32.5pc. The proposed budget also reduced the number of slabs from 12 to seven.

According to the official, the revised tax slabs and other proposals have been submitted to the International Monetary Fund (IMF). “Technical level talks will start in the next few days,” the official said, adding that they would “try to protect the salaried class falling in lower slabs”.

The Fund’s representative in Islamabad also confirmed that they were in “discussions with the authorities… to obtain more clarity on certain revenue and spending items”.

Duties on cigarettes, air tickets and mobile phones enhanced; heart association proposes tax on sugary drinks to protect citizens’ health

Responding to written questions shared by Dawn, IMF Resident Representative Esther Perez Ruiz said “We note the submission of the draft budget to the National Assembly last Friday.” However, she maintained that according to preliminary IMF estimates, additional measures will be needed to strengthen the budget and bring it in line with key programme objectives.

“Fund staff stand ready to continue to support the authorities’ efforts in this respect and, more generally, in the implementation of policies to promote macroeconomic stability,” she said.

Senate body reviews budget proposals

Separately, a meeting of the Senate Standing Committee on Finance, held under the chairmanship of Senator Saleem Mandviwala, reviewed the budgetary tax measures in the year 2022-23.

FBR officials told the committee that restaurant services and supply of goods were taxed separately. The former was a provincial subject, while there was a issue on supply of goods between centre and provinces, but the matter has now been settled, said chairman FBR Asim Ahmed.

The meeting approved a proposal to further increase federal excise duty on cigarettes as well as international business class air tickets as well as taxes on telecom services.

Senator Farooq Naik raised questions over the imposition of a 4pc sales tax on import of jewellery. He pointed out that this was a provincial subject and asked under which law such a tax had been imposed. The committee also rejected the increase in sales tax on electric vehicles from 12.5pc from 17pc, while Senator Naik suggested an exemption for small electric vehicles.

Representatives of the Islamabad Chamber of Commerce told the committee that the construction sector would be adversely affected by the government’s ban on imported goods. They said that six large hotels were being planned for Islamabad, adding that if the ban was not lifted, then this project may be affected.

The advance tax on filers in real estate industry has been increased from 1pc to 2pc, but the committee suggested to FBR officials that the advance tax for filers in real estate should not be more than 1pc.

The committee also unanimously approved the levy on mobile phones. FBR officials said they expected to generate about Rs670 million in revenue from this.

Pakistan National Heart Association officials told the committee that one in three Pakistanis were diabetic and that the use of sugary beverages was increasing the incidence of obesity, heart disease and cancer in the country, proposing a 20pc tax on all carbonated and sugary drinks.

They pointed out that there was a 13pc tax on soda but no tax on juices. At this, the FBR chairman said that such a tax can be levied only when the track and trace system – which can help keep track of products during the entire supply chain process — is in place.

“It will take a year,’ he said, adding that the proposal was in the national interest, but the committee should also hear the views of the industry. Consequently, the committee summoned the representatives of beverage industries and Pakistan National Heart Association in the next meeting.

FBR officials also informed the committee that the super tax imposed in the previous PPP government will now be merged with the new tax on the banking sector.

Published in Dawn,June 16th, 2022