Govt likely to reverse tax concessions for salaried class
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ISLAMABAD: The government looks set to reverse tax concessions extended by the PML-N government to benefit high-earning salaried and non-salaried individuals substantially more than the middle-class workforce.
“We are considering reverting back to the income tax brackets applicable in the tax year 2017,” an official source told Dawn who is privy to budget-making process for 2019-20.
On Sunday, a high-level meeting will be held where tax proposals will be reviewed for consideration in the next budget, the official said, adding more such meetings will be followed on discussing the tax proposals.
It is estimated that the reversal of tax rates for salaried individuals will help to pocket extra amount of Rs14 billion in the fiscal year 2019-20. It is estimated to collect income tax amount to the tune of Rs103bn from salaried individuals in the current fiscal year.
The PTI-led coalition government has already reversed some incentives through the amended Finance Act 2019 given to business enterprises and individuals through the Finance Act 2018.
Last year, the government had given sweeping tax cuts to low salary earners, raising the exemption threshold almost three times to Rs1.2 million from Rs400,000.
Instead of enjoying zero tax, a nominal tax of Rs1,000 for individuals in income brackets ranging from Rs400,001 to Rs800,000 and Rs2,000 for individuals in income brackets ranging from Rs800,001 to Rs1.2m was introduced in the budget.
For higher income earners, the previous government had scaled down the maximum slab to 15 per cent from 35pc in one go. However, the maximum slab was enhanced to 25pc through the amended Finance Act 2018.
According to the official, it is also under consideration to adopt the tax year 2017 slabs for taxing the income of non-salaried individuals. The estimated revenue from reversing to the previous slabs will help government to pocket extra amount of Rs24bn in the year 2019-20.
For the current fiscal year, it is estimated that the FBR will raise an amount of Rs66bn under income tax from non-salaried individuals. Similarly, the revision of tax slabs to the year 2017 will help to raise additional income tax of Rs5bn from association of persons in the tax year 2019-20. Currently, the Federal Board of Revenue (FBR) estimates to collect tax of Rs14bn from association of persons.
Read: FBR eyes Rs775bn in fresh taxes next fiscal year
According to official, all these proposals regarding slab-wise tax rates and exemptions threshold are under consideration and a final decision will be taken by the cabinet. It is also proposed that effective enforcement of proposed measures will help to raise extra Rs2bn from sugar and steel sectors in the year 2019-20.
This drastic reduction in tax liability perpetuates the regressive character of the taxation regime in Pakistan and is against the global tax system. The reforms were not just reducing tax slabs, but surrendering Rs90bn in taxes to high earners in the country.
Another proposal is also under consideration to decrease corporate income tax rates for small corporations. It is also under consideration to increase turnover tax for loss making companies to 1.25pc in the budget 2019-20.
According to the official, there is also a proposal to phase out exemption in corporate income tax and in the personal income tax of non-salaried individuals and AoPs starting from 50 exemptions and gradually reducing the number to 45, 35 and 15 over the next three years.
Three specific proposals are also on the table for review with phase wise reduction in BMR tax credit from 10pc to zero per cent under section 65B of the Income Tax Ordinance 2001 over a period of three years. Currently, the cost of this exemption is estimated at Rs88bn.
The elimination of profit on non-profit organisations under section 100C will help FBR to save around Rs7bn per annum. It has also been proposed to withdraw the tax exemptions given on new industrial undertaking and for those in the existing industries, the official said, adding it will be difficult for government to withdraw the concessions from industrial sector.
Published in Dawn, May 26th, 2019
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May 26, 2019 08:18am
Eventually the great grand plan of reformation in tax & revenue collections comes down to putting additional burden on the already-struggling salaried class. Bravo, Mr Khan!
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May 26, 2019 08:51am
High inflation effect the salaried class and now the effect of further taxes will ruin their life.
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May 26, 2019 08:55am
After crushing the poor this pathetic govt is tightening nooose around the neck of middle class especially fixed income group.
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May 26, 2019 09:07am
If government is eyeing to increase tax collections from the salaried class then i feel sorry for this government. Trying to break the back of lower middle class. Please catch big fish and increase tax net, its as simple as that.
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May 26, 2019 09:07am
A sad state of affairs. This government has continued to burden the high earner salaried class on the pretext of considering them the elite. The reality is that these high earners are not even able to afford a home of their own and are now finding it hard to even make ends meet. The real elite who continue to thrive in the undocumented economy get away scot free. In the past year and a half the so called high earner's (so called elites) real income has by reduced by 50% (devaluation), their expenses have gone up due to inflation, their dreams to buy their homes have been shattered due to doubling of interest rates. Their taxes have increased and have been made to pay for the full year in 8 months. On top there is a 17% sales tax on everything they buy and every transaction comes with withholding tax which the tax authorities never bother to return. They end up paying 50% in these taxes (income, sales and withholding) the tax rates of European countries in Pakistan where you get robbed if you use your phone in public. Enough is enough. Please go after people who are not paying taxes vs. squeezing every drop out of salaried class individuals even if you classify them as high earners. PTI has lost my support for sure.
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May 26, 2019 09:19am
Salary class tax is just 5 % of total collected tax and still they are not being spared. They have not raised salaries to that level where inflation has touched.
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May 26, 2019 09:43am
Miftah Ismail clever and shrewd man. To put PTI government in trouble they gave these exemptions. To tax in current budget is essential to meet tax target. This seems harsh but have to do it.
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May 26, 2019 09:46am
This is exactly you must not do
As FBR chairman said that the tax collected from salaries accounts to only 5 to 7 % of the total tax collection. Reverting to old tax sllabs will only bring an insignificant increase at a much heavier cost of directly hurting the most dedicated tax paying individuals.
Pls avoid this blunder.
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May 26, 2019 09:50am
Imran wants to gather taxes wherever he can, even if he must renege on other promises.
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May 26, 2019 09:59am
PTI government is curse for middle class salaried population. High income tax, high electricity, gas and fuel bill, double digit inflation and increasing unemployment.
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May 26, 2019 10:00am
IK and his selected team not fit for government, they should resign and there should be new fair elections
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May 26, 2019 10:01am
The government is considering the increase / decrease in taxes of different sectors but it is highly regrettable that the tax on rental income on property remains high ever. The tax exemption for all sectors were reduced 3 times from 4 lacs to 12 lacs but for rental income it remains same I. e. 2 lacs only.
If relief was given to all sectors then why this sector was not considered.
It is therefore requested to government through this channel to please consider the exemption to this sector also same as exemption for other sectors.
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May 26, 2019 10:06am
This move will force professionals to move abroad for a better prospect. It's another motivator of brain drain, income tax must be reduced and base be broaden.
It would go against the interest of people who will lose qualified doctors, professors and engineers. Govt must think before taking any step as situation is very fragile.
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May 26, 2019 10:29am
Follow Indian or similar pattern.
40,000 standard deduction from income free.
150,000 tax free in bonafide investment like Life Insurance, savings schemes etc
10,000 for medical insurance tax free.
250,000 tax free to all
Extra 50,000 for woman tax payers
and sr.ctzn
After above relaxation
income tax slabs
5% on differnece up to 5 lakh(2.5 to 5 )
20% above 5 lakh
30% above 10 lakh
3% education / development cess on payable IT.
No subsidy on Gas,Electricity to tax payer with income above 5 lakh
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May 26, 2019 10:37am
Long due.we in pak dont pay any taxes and when we work abroad we are ready to pay high taxes too.lets make pakistan great.tax more.its the need of the hour.rich should be taxed excessively.targets should he increased to 6 trillion and factories be given easy loans to create more jobs.
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May 26, 2019 10:38am
the government should resign instead of lading more and more taxes on people
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May 26, 2019 10:47am
I raise a call for boycotting taxes, its only fooling us while other 95% are enjoying their wealth. I earn for my family not for government's idiotic expenditures.
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May 26, 2019 10:52am
please tax us more so we have nothing to spend. The chairman said we won't burden the existing tax payers. What is this now????
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May 26, 2019 10:57am
Does any good come from paying taxes in this country apart from filling pockets of corrupt politicians. How much money have you recovered from corruption. Look at the streets and civic system, garbage every where, gutters boiling, no education no hospitals and you want to tax us more.
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May 26, 2019 11:14am
Collect taxes from agriculture doctors lawyers etc why salaried class target. If one is earning say 75000 then he can run his family easily. But here the salary in general is 15000 to 50000 which is insufficient to run a family smoothly. So do not burden the poor salaried class.
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May 26, 2019 11:26am
This would be a blunder. Instead of punishing regular tax payers, government should go after those who are influential and not paying taxes.This decision will not add a significant value in tax revenue and further alienate the government from the people.
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May 26, 2019 11:39am
If Pakistan is to compete with developed world then we need to have policies and development strategies like those countries. Can we compete with those countries when our tax rates are no where close to those countries? Instead of wasting time on further experimentation we should copy the tax regimes of the top 10 developed countries and choose from them.
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May 26, 2019 11:41am
No government has ever shown courage and guts to widen the tax net by taxing the elite, instead all have relied only on the already existing tax payers. This is injustice to the salaried class as they have always been burdened the most compared to any other class of tax payers. Where is the change !!!
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May 26, 2019 11:56am
Working class is always a soft target for any government given current inflation rate this reversal could be a disaster for working clasd, on the other hand this country is only belongs to elite and industrialists and it is very difficult for any govt to withdraw concession to industrialists because our parliament and cabinet represents only this class
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May 26, 2019 11:56am
This govt is not only making life miserable for middle class but also making it worst for themselves.
The only solution is to call for early election and Imran should take nation in confidence
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May 26, 2019 12:13pm
I will be directly affected by this tax. But, why pmln only ended this tax in the last year of their tenure and not in the first four years? To gain advantage in election year and to put the coming government under more pressure economically.
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May 26, 2019 12:19pm
Instead PTI should be taking steps to introduce proper stamp duty on property transfers, the stamp duty must reflect the real value of property transfers by the buyer, not what's written in the registry.
All the property money should be wire transferred for greater traceability, I can assure that FBR will collect much more revenue than going after the salaried individuals, since the revenue generation on salaried individuals is negligible.
All the tax evaders in PK have hoarded their black money in properties including the politicians, bureaucrats and the rest, make that transparent, then FBR will know exactly, who has what in their bag.
Until people with black money are not challenged, salaried people will keep on seeing this squeeze for decades, which is unfair.
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May 26, 2019 12:34pm
Please refrain from making people jittery.
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May 26, 2019 12:41pm
Imran Khan is trying to beat Sweden, where tax rate is 50% for salaried persons. If we want to be better than Sweden we need to put 60% tax on salaried persons. 70% tax on petrol so people will use cycles, a step to green Pakistan. All this collected money will be used to build our own submarines, saving huge amount in buying from other countries.
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May 26, 2019 12:48pm
Tax the elite class properly and see the results.
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May 26, 2019 12:52pm
We give money to the state who doesn't know how to manage the country, nor provides any service to the nation. Why shud we pay a single penny to this state?
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May 26, 2019 12:55pm
Great "Nayya Pakistan". But seems PML had done it with bad intentions to impede working of succeeding government. They knew fully they could not win the election.
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May 26, 2019 12:59pm
Welcome move. Unless we salaried class dont contribute who will pay for the defence.
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May 26, 2019 01:11pm
Just squeeze those unfortunate people again, who are already inside the net, thats the easiest way off course.
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May 26, 2019 01:13pm
Increasing tax on salaried class would be extremely unjust and unfair after giving amnesty to all criminals and tax thiefs. In amnesty you just pay 3 or 4% tax and as a salaried individual getting 2 lak per month you pay around 25% tax. The message from FBR is loud and clear..Get out of the tax net, we dont want you there. Just dont pay any tax and an amnesty will be coming out shortly.
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May 26, 2019 01:17pm
This is another nail in the coffin of already struggling middle class. I hope someone is reading the comments here, PTI is bound to loose their most hardline supporters
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May 26, 2019 01:20pm
What happened to the $200 billion Imran Khan had promised to bring back?
This Govt is doing exactly the same as the previous govts were doing. More taxes on people already paying taxes but nothing on those who are not part off the tax net.
Eventually this will encourage people to hide their income and not to file taxes at all
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May 26, 2019 01:36pm
Salaried employees suffer in all countries. Their income is there in black and white. Business people can happily conceal income.
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May 26, 2019 02:15pm
The Criminal Act of "Sharif Dacoits" Government, instead of bringing Business-men and Agricultrists in Tax net, lowered existing rates on Sakaried class to decrease Tax Collection for a country with ruined economy !
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May 26, 2019 03:06pm
No government has ever shown courage and guts to widen the tax net by taxing the elite, instead all have relied only on the already existing tax payers. This is injustice to the salaried class as they have always been burdened the most compared to any other class of tax payers. Where is the change?
The only change in the present lot of 'governing people' is the change in the party name, otherwise the mindset and the approach is the same.
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May 26, 2019 03:34pm
The dejected common man might still get agreed to pay higher taxes but what facility does he gets out of it? The talk is all about increasing taxes and not at all on the relief to the common man.
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May 26, 2019 03:44pm
Naya Pakistan, Right ?
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May 26, 2019 03:47pm
It is ever thus around the world, not just in Pakistan. It is easier to collect at source and the rich and their money have expensive tax accountants and nimble to fly to offshore tax havens.
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May 26, 2019 03:50pm
The readers of these valued coloumns may kindly take my words as granted that PTI government is not at all capable to deliver any thing for the poor or middle class people, except beating hollow drums and accusing past governments.
Imran Khan is bent upon squeezing the last drop of the blood from the veins of working class who are already at the verge to collapse due to sky high inflation in the country which has already become unbearable for the salaried class.
This will increase white collars crimes and economical disbalance in the society.
Every body wants to send their children to schools for educating them and the fees of English medium schools have gone sky high to to which parents were forced to file suit against the schools who were charging exirbitant fees.
Luckily, parents got relief through the court of law. It seems that once the budget of 2019-2020 is announced people will start filing petitions against government actions as PTI have no ears to listen to grievances.
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May 26, 2019 04:06pm
@A.Rehman, You want tax reduction on rental income in these difficult financial times?
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May 26, 2019 04:08pm
The inflation is already very high, prices of every commodity is going up including oil & gas.
Now, the government is deciding to revert the tax benefit.
Feel really sorry that masses voted for change and getting otherwise, all the way.
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May 26, 2019 04:22pm
What about the elite? Why are they not being taxed at a similar rate of about 40% as in the developed world? Is it because they are the ones making the rules? In the USA, the property tax on a house worth Rs 10 crore is Rs 15 lakhs a year. And of the 15 lakhs, almost 10 lakhs goes to the school system. Whereas in Pakistan it is not even Rs 1 lakh a year. And who knows where that ends up? What a shame.
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May 26, 2019 04:39pm
This is certainly not a good move. Why tax the honest Tax paying salaried working people.
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May 26, 2019 04:41pm
Very sad and very bad.. Disappointment from Khan
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May 26, 2019 05:58pm
On one side you are increasing the prices of basic necessities putting enormous burden on the salaried class who earn a fixed amount of income and on the other side you increasing taxes on the salaries earned further squeezing the already squeezed. The purchasing power of PKR has already drastically come down making real income hurt the most. Just putting extra tax burden on the salaried class isince they are in the tax net and can not hide their incomes like others s extremely unjust...
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May 26, 2019 06:30pm
Restore Wealth Tax which used to be only 2% , its removal is the root cause of Benami properties/assets.
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May 26, 2019 06:43pm
@FJ, sure. This government can only crush the already crushed underprivileged majority of this poor country; while providing full support and protection to the rich elites. So much for 'Insaaf ' in Naya Pakistan.
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May 26, 2019 06:45pm
@A&A, that's the whole plan. PM has promised that all 'economic' and 'poverty ' problems will be solved in a few months. If the majority of poor Pakistanis die then the problem is automatically solved , right?
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May 26, 2019 06:54pm
Government should reverse it. It was a very bad decision of last Government.
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May 26, 2019 08:39pm
Everyone has to pay taxes. In western countries every person even a laborer has to pay tax on his earning. In order to do salaries are paid by checks only. Pakistan should start this immediately.
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May 26, 2019 08:45pm
Instead of increasing tax base they are putting additional burden on salaried class. The only people who pay their taxes regularly. Such steps might bring revenue in short term but only solution is to bring untaxed people into tax net instead of squeezing already burdened salaried class
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May 26, 2019 08:56pm
What else Imran can do apart from taxing the taxed? Can he actually increase the number of Tax payers? Can he tax the religious parties and their affairs?
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May 26, 2019 11:51pm
I earn in excess of Rs. 200k a month but I pay for my children's private school and private healthcare. I live in a rented house and with high inflation have little hope of saving to buy my own house. There is no public transport available so I have to own a car and and pay for fuel. Even my education was self-financed from private schools and universities of Pakistan!
I already pay taxes comparable to Europe and Canada with minimal or no state benefits. It is hard for anyone to build a case for me to be paying more taxes.
On the flip side of all of this is the fact that I am the one who is pushed off the road by the protocol vehicles of politicians and and high ranking government officials! Ironic that individuals like me pay for their protocol and armed guards! Something, somewhere is completely broken in Pakistan and PTI government is failing miserably to fix it!!!
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May 27, 2019 01:06am
Yes squeeze every penny from commoners who honestly pays their taxes and bills. Let Corruption Mafias and their creators enjoy their looted money. Provide them VIP protocols on tax payers hard earned money. This is Naya Pakistan government for you. Extremely disappointing.
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May 27, 2019 01:44am
This is the only solution,support you...take loans or take from citizens we have just two options
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May 27, 2019 01:50am
in china we pay 47 percent tax on our salary...i never saw anyone who say it is difficult to pay...the problem is that only one in our families earn while others only eat we can not survive this way...work success...PEACE
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May 27, 2019 06:43am
@Taher, Thats what need to be address, why government is not cutting its employees salaries to half, why they are stealing our hard earned money whom in any form is converting in to foreign exchange, while all government employees are enjoying the lavish life for no reason.
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May 27, 2019 08:26am
Don't do...there is already high inflation and the salaries dont pace up with the rising cost of living
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May 27, 2019 12:13pm
@Owais, Taxing the elite and ignoring their interests means losing the seat. The incumbent government dare not do that or Aleema Khans and Jahangir Tareens and the likes (read relatives and friends) won't be very happy.
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