ISLAMABAD:
Prime Minister Shehbaz Sharif on Tuesday gave instructions to take up the issue of reduction in some of the income taxes with the International Monetary Fund (IMF) after his income tax panel proposed a Rs975 billion relief package for corporate and salaried classes.
The recommendations include reducing the tax burden on the salaried class by 25%, abolishing the income tax surcharge and withdrawing the wealth tax imposed in the shape of capital value tax on foreign assets.
Out of the Rs975 billion proposed package, the immediate relief cost is estimated at over Rs600 billion, according to the tax reform proposals presented to PM Sharif by a private sector-led panel on income tax. However, due to the compulsions of the IMF programme, the government plans to implement only those proposals that will be endorsed by the IMF.
Chairman of the Working Group, Shehzad Saleem, presented the recommendations to the premier. PM Sharif did not immediately take a decision on these recommendations as the consensus was that the government should first strive to abolish taxes such as the super tax, reduce the minimum income tax, end the corporate dividend tax, abolish the Sindh Infrastructure Cess and Punjab cess, withdraw the advance income tax on exporters and abolish the worker welfare and participation taxes, said the sources.
An official statement released by the PM Office stated that the meeting was given a comparative briefing on tax rates in various sectors, including the corporate sector. The prime minister decided to form a committee, headed by Finance Minister Muhammad Aurangzeb, to make these proposals actionable, according to the announcement. Other members would be Shehzad Saleem and Minister of State for Finance Bilal Kayani, who has a key role in this exercise.
The meeting was held days after the national coordinator of the Special Investment Facilitation Council (SIFC) said that industrialists were the easy prey of the tax machinery. Lt General Sarfraz Ahmad underscored the need to abolish the super tax, the dividend tax, and reduce the corporate income tax to 25%.
The PM Office stated that the finance minister-led committee would submit a roadmap outlining practical steps to implement these measures. There has now been a consensus among the government, the military establishment, the business community, and independent experts that the country’s economy cannot grow until these unreasonable taxes are either reduced or abolished, and energy costs are brought to regional levels.
Sources said that it has been proposed to reduce the tax burden on the salaried class by 25% and to end the 10% surcharge on income above Rs10 million. This would provide Rs120 billion relief to the inflation-bitten salaried class. According to another proposal, the working group has recommended the immediate abolition of the super tax, which will provide a relief of Rs190 billion to the corporate sector. The tax had been imposed only for a year many years ago.
The group has also proposed reducing the corporate income tax to 25% and bringing down the higher rates on banks and petroleum companies to standard rates over two years. The move will provide a relief of Rs170 billion, although it was not listed among the priority items by the PM.
The panel has also proposed halving the minimum income tax immediately and then eliminating it in two years, which would provide a relief of Rs160 billion. The 15% corporate income tax is proposed to be abolished, which will inject Rs80 billion into the economy, said the sources. It has also been proposed to withdraw the capital value tax on foreign assets, which will give a relief of Rs5 billion. The tax has been criticised by many since the beginning.
Prime Minister Shehbaz Sharif said the government was taking practical measures for export-led economic growth and assured the implementation of recommendations of various working groups.
The working group has also proposed cutting withholding tax rates on the supply of goods, toll manufacturing, services, and companies to provide Rs175 billion relief. But this does not seem to be a priority of the government at this moment, said the sources.
There is a possibility that the government may abolish 1% advance income tax on exporters and end 1.9% Sindh cess and 0.9% Punjab Infrastructure Cess in consultation with the provinces. The PM was also inclined to abolish the workers’ welfare fund and workers’ participation tax to give Rs50 billion relief, said the sources. It has been proposed to abolish the advance income tax on remitting money abroad through debit and credit card payments, said the sources. The prime minister said the government held the tax-paying businesses and companies in high regard, adding that only strong businesses and a robust economy could generate tax revenues.
