The Senate Standing Committee on Finance has finalized its recommendations for budget including a suggestion to raise the tax rates for the higher slab from proposed 15 to 25 percent. The proposals were finalized on Tuesday by the committee will be presented in the Senate for endorsement, which will be then referred to the National Assembly for approval.
In terms of revenue, the only proposal with a considerable implication was to up the taxes for high-income class. The committee has recommended revising the tax on high-income people to 25 percent from the 15pc, proposed in the federal budget. In the proposed budget of 2018-2019, it was recommended to scale down tax rate to 15pc from 35pc for individuals including the salaried class. The tax exemption level was enhanced to Rs 1.2 million per annum from existing Rs 400,000, with the argument that it will benefit the lower salaried class.
The senators objected to the tax relief by stating that such low-level taxation was, in fact, a ruse to attract salaried individuals ahead of the upcoming elections to the ruling party, as the massive change in taxes will increase their net income. Committee Chairman Farooq Naek said: “This is a populist measure and has no economic justification.” The objection was also supported by other senators from opposition parties.
Federal Bureau of Revenue (FBR) officials informed the committee that the revision of taxes will give a benefit of more than Rs20 billion in revenue in the next fiscal year and if said changes are not made in the tax rates it will cause a revenue loss of Rs 90bn per annum. Former Secretary Finance Dr. Waqar Masood, who was called in to assist the committee on tax-related matters, said the slight changes made in the taxable slabs will help to an extent in saving the revenue loss. He also mentioned that some corrections will be beneficial to the tax system.—INP