ISLAMABAD: The government is still debating the fate of key revenue measures just a day before budget announcement on Friday.

Sources in the Revenue Division familiar with the matter told Dawn on Wednesday that the fate of at least three major taxes — super tax, tax on bonus shares and on undistributed inter company dividends — hangs in the balance.

The tax on bonus shares was introduced in the Finance Act 2014, while the other two came in 2015. The super tax was originally supposed to be a one-off measure to help meet the costs of resettlement of people displaced due to military operations but has been renewed ever since.

Three major taxes could face the axe, no replacement in sight

All three measures met with strong industry resistance, who complained that they amounted to a penalty for compliant taxpayers.

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Their withdrawal has been a key demand in budget proposals drawn up by industry associations that represent big businesses, such as the Pakistan Business Council and the Overseas Investors Chamber of Commerce and Industry.

Federal Board of Revenue was able to collect Rs14.5 billion in the 2015-16 with another Rs22bn in 2016-17 while the amount is expected to go up when the revenue figures for the current fiscal year are finalised.

In tax year 2014-15, government imposed 4pc super tax on banking companies and 3pc on all other taxpayers with income of at least Rs500 million.

The tax on bonus shares yielded Rs240.64 million in its first year of implementation in 2014-15 and another Rs460.86m in 2015-16. The data for other years are yet to be compiled.

On the pattern of giving major relief to individual taxpayers, the official said that prime minister wants to give similar repose to bigger taxpayers as well. But he added that the final decision will be taken by the Federal Cabinet.

Other proposals under consideration are to further extend the tax credit and relief on installation of new plants until June 2019. The facility is set to expire by June 30, 2018.

Several withholding tax rates (WHT) will also be revised upward for non-filers of income tax returns.

The government has imposed 20 new WHT since June 2013 while increasing the rates for non-filers on the pretext of improving tax compliance.

The number of WHT categories has risen to 56 from 36 since June 2013. As a result, WHT accounted for over 70pc of the total direct tax collection.

FBR has developed a list of items whose imports have surged due to free or preferential agreements and will now be subject to additional regulatory duties.

The list was developed in consultation with local industries to provide protection against cheap imports.

There are several administrative measures which will be adopted in the budget to shore up revenue collection in taxes.

Published in Dawn, April 26th, 2018