Govt won't go for taxing companies' reserves after strong resistance
Last updated on: 04 June,2023 09:45 am
Businessmen call for broadening tax base, stemming leakages
ISLAMABAD (Web Desk) – The Shehbaz government backtracked on a proposal to impose advance tax on companies’ reserves in the upcoming budget, as the Federal Bureau of Revenue (FBR) is unlikely to meet the target set for the current financial year, sources say.
The reversal also comes as at a time when the International Monetary Fund (IMF) is pressing hard for increase revenue collection with reaching the much-awaited staff-level agreement for releasing the $1 billion tranche before the announcement of budget next week now looking near impossible.
It was the Reform and Revenue Mobilisation Commission (RRMC) which had made this proposal but the reservations shown by the corporate sector forced the coalition government to drop the idea despite the fact that it has been pushing hard to generate more revenue albeit without expanding the tax base.
The RRMC had proposed an advance tax on the undistributed reserves of both listed and unlisted companies.
During a meeting with Finance Minister Ishaq Dar on Saturday, the Pakistan Business Council (PBC) advised against tax on retained reserves due to liquidity and cost of funding working capital. It also called for not changing the present the Final Tax Regime (FTR) on exports.
Other suggestions presented by the PBC included broadening the tax base and stemming leakages as it cited disproportionate burden of taxes on industry, underinvestment in socioeconomic development and scope to raise Rs2 trillion additional taxes from under-taxed sectors.
The businessmen also stressed the need for long-term tax policies without any U-turns, as inconsistent government plans are one of the major reasons behind the economic mess the country is in.
Earlier, it was reported that Pakistan was unlikely to meet the $32 billion exports target for the outgoing financial year, which means the country will continue facing foreign reserves shortage.
Read more: Is Pakistan going to miss tax collection target for FY23?
According to the monthly data released by the Pakistan Bureau of Statistics, the total volume of exports during the July-May period – the first 11 months of 2022-23 – stood at $25.36bn, meaning there is a shortfall of around $6.64bn while the country only has one more month of June to go.