Govt announces special tax relief measures to enhance tax to GDP ratio

Govt would protect existing tax payers so that no further burden is placed on their tax liabilities.

ISLAMABAD (Dunya News) – Minister for Finance Shaukat Tarin on Friday said that government had taken several measures in order to provide tax relief to already tax payers, besides introducing steps to enhance tax to GDP ratio, which was at the lowest level as compared the regional countries.

Presenting the Federal Budget 2021-22 in the National Assembly, he said that during current year historic refunds were paid which were 119 percent higher than the corresponding period of last year.

Highlighting the tax measures in the budget, Tarin said that these initiatives were need of the hour. Tarin said that he planned to fundamentally restructure the tax regime and working of the tax administration.

He said that the proposed tax policy would emphasize on expansion of tax base through identification of new tax payers, gradual removal of exemptions and concessionary provisions and reduction in tax rate.

The government would also protect the existing tax payers so that no further burden is placed on their tax liabilities.

At the outset our tax policy would be based on the principals of restoring the purity of self-assessment scheme, which would be mean that except there is any definitive information’ contrary to the information disclosed in a tax return, all tax returns shall be deemed as assessment orders, he added.

He said that the returns under self-assessment scheme would only be subjected to audit once they are chosen through an automated risk-based selection procedure, furthermore, we would make use of outside auditors for carrying out the audit, which will be done remotely through an e-Audit system.

These audits would be very serious and willful evasion shall be considered a criminal offense carrying a jail term, adding that we will strive to hit hard on harassment of taxpayers.

The two taxes; tax on income and tax on consumption would be the primary instruments of tax mobilisation, he said adding that government will reorient the tax machinery to go after tax evaders, identify those who are outside the tax net when they should be inside, and make extensive use of information technology to detect prospective taxpayers and reach out to them through the use of electronic communications, thereby eliminating personal contact with the taxpayers.

Progressivity in taxation shall be further strengthened, the rich will be asked to pay their due share in taxes, he said adding that exemptions available to powerful groups shall be removed.

Tarin said that no new taxes shall be imposed on the salaried class, the system of track and trace will be implemented initially with four industries but would be expanded to the full spectrum of industrial and trading activities.

A major plank of our strategy would be the expansion of GST base and in this regard, we would bring into the tax net all retail and wholesale transactions which are using emerging and evolving digital and electronic payment systems.

To this effect, we would help traders install the point-of-sale (POS) equipment and link it up to the FBR system.

Finance Minister Shukat Tarin said that in order to facilitate the tax payers Pakistan Single Window shell be operational in near future, adding that the activities connected with the clearance of imports , exports on a single portal which would lead to significant reduction in the number of days required for cargo clearance.

The work on harmonization of sales tax on services with the provinces is moving apace and would be made fully operational during the year, he said adding that government would simplify the system of tax through introduction of new simplified tax return forms and new tax code and rules.

Besides, he said that specific tax policy proposals included in the Finance Bill 2021 on Sales Tax and Federal Excise Duty, adding that in Sales Tax and Federal Excise Duty, the government were giving the relief measures including enhancement of threshold for cottage industry.

The small businesses are the backbone of our economy as they create maximum job opportunities and provide subsistence to significant number of people, he said adding that to facilitate small businesses, threshold of annual turnover is being enhanced now a cottage industry having annual turnover of up to Rs 10 million will not be required to register for sales tax.

Previously, he said a small business having turnover of Rs 3 million per annum was required to register and face the hassle of filing monthly sales tax returns, he added.

The minister said that in order to promote ease of doing business as well as to facilitate the registered persons and enhancing ease of doing business, the government is proposing various schemes such as allowing constructive payment for adjusting payable and receivable under section 73 of sales tax law, doubling the tier-I retailer shop area requirement for furniture business and enhancing the scope of compensation for delayed refunds, and excluding advance payment from chargeability of sales tax.

Relaxation of restriction on input tax adjustment under section 8B, removal of restriction on input tax allowance under sales tax law has been a major demand from business community: however, considering the importance of minimum value addition on VAT model, it is proposed to eliminate this restriction on highly regulated corporate sector that is public limited companies listed on Pakistan Stock Exchange, he added.

The government has proposed withdrawal of FED and Reduction in Sales Tax on Locally Manufactured cars up to 850 cc, he said adding that rising prices of locally manufactured small cars is a major concern for low earning families.

Accordingly, it is proposed that small cam up to 850 cc capacity may be exempted from levy of FE besides reducing Sales Tax rate from 17% to 12.5%.