THE government has indefinitely extended the four percent super tax being charged from the banks whilst also giving income tax concessions to local and overseas Pakistanis on their investments in the realty sector and the digital accounts. These measures have been enforced with effect from 12th February through a presidential ordinance – the second in the past three weeks.
As regards super tax is concerned, it was introduced for the first time in 2015 for a period of one year after Pakistan Army launched operation Zarb-e-Azb against militants in the tribal districts. The purpose was to raise funds for fighting war against terrorism and rehabilitate the displaced persons. After numerous extensions, the four percent tax lapsed in December last year. In our view, there is no justification for this tax now as the overall security situations stands improved. The banking sector has been demanding withdrawal of the tax but it appears that it has been further extended and that too for an indefinite period to help the FBR achieve its revenue targets. We will ask the government to reconsider its decision. The focus must be on bringing further reforms in the tax collection body in order to widen the tax base.
However, the sweeping tax concessions announced for those investing in the Naya Pakistan certificate – a debt instrument launched to raise funds for stabilizing foreign exchange reserves, is really a welcome step. The tax concessions are over and above the highly lucrative profit rates paid to the investors. These certificates have already helped generate about $ 460 million and the tax concessions definitely will woo more expatriates to invest in them. Indeed the overseas Pakistanis are contributing immensely to the country’s economy through their invaluable remittances.
Over the last few months, they have sent record remittances. Hence, the process of facilitating them in every possible manner must continue in order to attract their investment in different sectors of the economy. The tax ordinance also envisages imposition of Rs 50,000 to Rs 200,000 income tax on sale of a newly bought car within three months of its purchase. Indeed this will discourage ‘on money’ culture which has been a major factor in price hike of cars over the years. But at the same time, there is a need to provide some tax relief to the auto manufacturers in the new auto policy to bring down the skyrocketing prices of the vehicles.
