FINANCE Minister Ishaq Dar and his team surely deserve credit for presenting a budget that envisages addition of minimum possible tax burden on the people and instead liberal exemptions have been given to different sectors as part of the strategy to stimulate economic growth. No doubt the Government has imposed additional taxes worth Rs 223 billion in the budget for 2023-24 but the proposals have craftily been devised to ensure that these do not put more pressure on the already hard pressed common man.
The additional taxes imposed in the new budget include withholding tax of 0.6 percent on cash withdrawal from banks and expanding super tax across the board besides a proposal to secure legal powers to bring up to 50 percent windfall gains profit into the tax net. In total, the Federal Board of Revenue (FBR) will fetch additional revenue of Rs 903 billion through continuation of taxation measures taken through the mini-budget in February 2023, which will add Rs680 billion in the whole financial year while additional revenue measures will fetch Rs 223 billion. The continuation of the measures implemented under the mini-budget and imposition of additional taxes is also understandable as the Government has to increase the tax collection, which is also a demand of the International Monetary Fund (IMF). An ambitious tax collection target of Rs. 9200 billion has been set and it has to be seen how the authorities succeed in meeting the target without introduction of more tax measures during the next financial year. There are, of course, some measures that would have an impact on the people like re-imposition of 0.6% advance adjustable withholding tax on non-ATL persons on cash withdrawal. We have all along been emphasizing that imposition of withholding tax on cash withdrawal is an anti-savings approach and it was with this in consideration that such withholding taxes were withdrawn by the previous PTI Government. The re-imposition of the tax at an excessive rate, albeit for non-filers, might not contribute meaningfully towards the envisioned goal of forcing citizens to become filers but it would be unjust to impose this tax on those who do not fall into the category of prospective filers. The prices of second-hand cars have already gone beyond the buying capacity of the middle-class due to massive fluctuation in exchange rate and the decision to withdraw capping of the fixed duties and taxes on the import of old and used vehicles of Asian Make above 1300 CC would push their prices further high. Similarly, imposition of one percent withholding tax on supply of goods other than rice, cotton seed or edible oil and rendering of services would compound the inflationary situation. Imposition of additional tax at the rate not exceeding fifty percent on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors seems to be logical as those getting windfall profits must contribute to the national kitty. The proposal to impose FED on energy inefficient fans @ Rs. 2000 per fan and incandescent bulbs @ 20% ad valorem would make items commonly used by the poor more costly. The budget has widely been hailed by the representatives of the business community as no new tax has been levied in the budget on the industry and instead numerous exemptions given despite tight fiscal position of the Government. Exemption of customs duties on import of machinery, equipment and inputs for manufacturing of solar panels, inverters and batteries would help bring down the cost for installation of solar energy solutions for homes and other buildings. Grant of exemption of sales tax on plant saplings, combine harvesters, dryer for agricultural products, no-till-direct seeder, planters, trans-planters, other planters and bovine semen along with exemption of sales tax on import of IT equipment by exporters of IT are significant relief for the two sectors. However, withdrawal of exemption of sales tax on edible products sold in bulk under brand names or trademarks and enhancement in reduced rate of sales tax from 12% to 15% on supplies made by the POS retailers dealing in leather and textile products would add to the inflationary pressure for the common man. Construction cost has increased manifolds but the Government has not announced any worthwhile measures to bring it down. However, the proposal of 10% reduction in tax liability or Rs 5 million whichever is lower for a builder and 10% reduction or Rs 1 million whichever is lower for an individual for own construction of house for three years would serve as an important relief for builders of houses.
