The government is reconsidering tax proposals due to the high cost of living


The government has initiated consultations with a view to reconsidering a partial rollback of the proposed income tax increases for employees and exporters, in addition to the phased implementation of the proposed 18% sales tax on infant milk.

The internal deliberations come in the wake of sharp criticism from all segments of society and businesses reeling under the burden of the unprecedented additional revenue measures of Rs 1.5 trillion.

Sources revealed to The Express Tribune that Finance Minister Muhammad Aurangzeb discussed the issue of payroll tax with Prime Minister Shehbaz Sharif. However, the outcome of the consultations depends on the fiscal leeway and the approval of the International Monetary Fund (IMF).

The government increased taxes on the salaried class to raise another Rs 75 billion in the next fiscal year, even as the group has already pocketed Rs 360 billion this year. Similarly, despite reducing electricity costs of industrialists by Rs240
billion, the Prime Minister is also under pressure to reverse the decision to charge standard income tax rates to exporters.

There is a proposal to gradually increase the income tax burden on exporters instead of adopting it from the current fixed regime of 1%. During the first eleven months of this fiscal, exporters paid a paltry amount of Rs85.5 billion, which may rise to Rs100 billion by the end of June.

However, any income tax relief to the exporters does not bode well, especially at a time when the government has hit almost every segment of the society with unnecessarily heavy taxes and the goods consumed by everyone, including the poor people.

“Our party is against an increase in income tax on workers and exporters,” said Senator Saleem Mandviwalla of the Pakistan People’s Party (PPP), chairman of the Senate Standing Committee on Finance. He said the standing committee would reject both the government’s proposals.

The standing committee on Saturday also advised the government to revise its budget proposal to impose 18% sales tax on infant milk. “I will take up this issue with the Finance Minister with our own recommendation that the standard rate of 18% GST can be reduced,” FBR Chairman Malik Amjad Zubair Tiwana said.

The sources said the government has already communicated to the FBR to implement the increase in sales tax on infant milk in a phased manner instead of charging 18% at once.

The government has proposed in the budget to withdraw the zero-rate facility available on the sale of infant milk, in a bid to recover Rs20 billion in additional taxes in the next fiscal year.

The actual impact of the proposed 18% VAT rate on infant milk will be about 25%, after deducting the cost of additional sales tax and 2.5% new income tax on supplies, said Sheikh Waqar Ahmad, Nestlé’s head of external affairs. -Pakistan.

Senator Anusha Rehman of the PML-N said a sudden 25% increase in infant milk prices will be shocking to the people. She added that there should be a gradual increase in sales taxes so that people.

“The packaged infant milk is a high-quality product because people in my village do not use packaged infant milk such as Lactogen,” says Amjad Zubair.

“Mothers in your village may not use the milk powder, but it is used by the majority of mothers in Pakistan,” said Senator Saleem Mandviwalla.

The government has also imposed 18% VAT on packaged milk to raise another Rs75 billion in taxes. This will increase the price of one liter of milk from Rs290 per liter to Rs342.

The PML-N government has levied heavy taxes on the budget to achieve a primary budget surplus, but has not chosen the other option: cutting spending by reducing the number of ministries and limiting expenditure.

The proposed budget of Rs18.9 trillion for the next fiscal year is 30% higher than this fiscal year, indicating that the ruling party was unwilling to follow a path that might have irritated its allies.

The standing committee approved a budget proposal to enable Pakistan International Airlines to adjust its losses for the next ten years. Pakistani Senator Mohsin Aziz of Tehreek-e-Insaf opposed the special exemption for the PIA.

“The government is providing a hidden incentive to the potential buyers of the PIA, who will not have to pay income tax due to the ability to adjust future profits against past losses,” Senator Aziz said.

The committee also supported the government’s proposal to ban foreign travel of non-filers of income tax returns. The FBR chairman clarified that not every non-filer would be banned from foreign travel as the restriction would apply only to those who have been issued notices to file their annual returns.

The standing committee objected to the government’s proposal to introduce yet another new category of “deferred income tax return filers” and charge higher tax rates from them.

By introducing the concept of late filers, the government narrows the path somewhat for the non-filers by telling them that they can still buy a large property by paying higher than the filers’ price but still less than the price of the non-applicants. Senator Mandviwalla.

In the budget, the government has introduced three different income tax rates for filers, late filers and non-filers, with the maximum rate for non-filers.