Islamabad, June 24 Pakistan’s Finance Minister Miftah Ismail has announced a new fixed tax scheme on shops outside of the tax net to reduce the budget deficit and elaborated on the “super tax” on 13 large industries announced by the prime minister that rattled the stock market, Dawn reported on Friday.
Ismail said this while addressing a session of the National Assembly convened to wind up the budget debate. He said that the country will not default as it was on the path to progress. He had presented the budget for the fiscal year 2022-23 with an outlay of Rs 9.5 trillion on June 10.
Ismail further said that most of the recommendations made by lawmakers in the Senate and NA during preceding sittings had been incorporated into the budget, while referring to the taxes announced by Prime Minister Shehbaz Sharif earlier in the day, adding that no indirect taxes had been imposed and neither had any tax been imposed on consumption.
He said the Pakistan government had committed to the IMF that the primary deficit of Rs1,600bn recorded this year would not only be brought down but there would be a surplus of Rs153bn.
To achieve this, as well as achieve self-reliance, an additional tax of 1 per cent would be imposed on individuals and entities whose annual income exceeded Rs150m on account of poverty alleviation. Similarly, he added, those with an annual income of over Rs200m would be subject to an additional tax of 2 per cent, those earning more than Rs250m to 3 per cent and those having an annual income of more than Rs300m would be taxed 4 per cent of their income.
The minister said companies working in cement, steel, sugar, oil and gas, fertiliser, LNG terminals, textile, banking, automobile assembling, cigarettes, beverages, chemicals and airline sectors would have to pay this tax, while entities in the other sectors, would have to pay this one-time additional tax amounting to 4pc of their income.
Regarding details of other taxes, he said there were around nine million retail shops in Pakistan and the government wanted to bring around 2.5 to 3 million of these shops within the tax net.
For this purpose, he said, a new scheme had been introduced under which the income tax and sales tax that these shops had to pay had been “fixed with their electricity bills”. He added that under this initiative, small shops would have to pay a fixed tax of Rs3,000 monthly and big retailers Rs10,000.
Moreover, he said retailers who were dealing in gold and had shops of 300 square feet or less would have to pay a fixed income and sales tax of Rs40,000. And for bigger shops, the sales tax had been reduced from 17 per cent to 3 per cent, he added.
Ismail said the withholding tax on gold sold by individuals to goldsmiths had been reduced from 4 per cent to 1 per cent.
He said that a similar scheme of fixed tax would be announced for realtors, builders and car dealers.
He added that the government had withdrawn the condition of withholding tax on companies operating in the IT sector and had sales of less than 80m. He added that tax on venture capital funds invested in the IT sector had also been removed.
About oil marketing companies, Ismail said these entities had to pay a minimum tax of 0.75pc, which had been reduced to 0.5pc.
Moreover, he said, 5per cent commission was cut on outgoing indenters at the time of receipt. “This has now been reduced to 1per cent.”
Overseas Pakistan who had a NICOP would be considered included in the list of active taxpayers so that they did not have to pay any additional taxes when buying a property, Ismail said, adding that a provision of 50pc reduction in capital gains tax for those who had been allotted plots while in services was initially removed from the budget but now it had been restored.
Families of martyrs and war-wounded individuals would be exempted from tax on income from plots, Ismail said and added that sales tax on skin and hides and surgical instruments had also been removed.
The minister also spoke about relief measures taken by PM Shehbaz, including ‘sasta petrol, sasta diesel’ scheme and a programme for providing wheat flour, sugar and ghee at utility stores.
Ismail also told the house that the tax target, which was initially set at Rs7.004tr had been increased to RS7.47tr. At the same time, he added, the target of non-tax revenue that was set at Rs2tr had been revised down to Rs1.94tr.
He announced that the government would give Rs4.37tr to the provinces.