The government has decided to impose regulatory duties on luxury and non-essential items and announce an incentive package to bring evaders under the tax net to bridge shortfalls in revenue collection.
Imports of luxury items have gone up over the past few months and Finance Minister Ishaq Dar is not happy with the trend.
Mr Dar briefed the National Assembly’s Standing Committee on Finance and said the substantial increase in imports of luxury items was a worrisome factor for the government and he was working on various proposals to curtail them. The Federal Board of Revenue has come up with a detailed package to generate revenue and the prime minister has approved it. The IMF has proposed Rs40bn revenue measures for bridging the revenue shortfalls. The FBR proposal will have to be approved by the Economic Coordination Committee of the cabinet.
The ECC meeting was scheduled for Friday, but it had now been postponed, an official in the finance ministry told Dawn. A source told Dawn that as per the FBR proposal the government had decided to increase regulatory duty on 287 items, mostly processed eatables, from 10pc to 15pc; from 5pc to 10pc on 14 items; from 15pc to 20pc on around 15 items and from 20pc to 25pc on other products. It has also decided to withdraw income tax exemptions and increase federal excise duty on a few products including cigarettes.
Read More: Texas Health Worker Tests Positive for Ebola
The income tax measures are expected to be promulgated through a presidential ordinance. Mr Dar justified the decisions by saying that Pakistan could not get benefits of the low oil prices because there was a considerable increase in imports of luxury items. He said the State Bank of Pakistan has also expressed concern over the rising import bill despite low oil and commodity prices in the international market.
The finance minister said the government was willing to offer fixed scheme for income tax non-filer traders to bring them under the tax net. He said he was also willing to create a special block for dealing with the new taxpayers to be brought under the new scheme. The deadline for deduction of withholding tax on banking transactions at reduced rate of 0.3pc will expire on Nov 30. “We expect to reach an agreement with traders on the scheme to make it effective from next month,” Mr Dar said.