ISLAMABAD: The Special Assistant to the Prime Minister on Revenue, Dr Waqar Masood Khan Thursday held the first budget preparation meeting at the Federal Board of Revenue (FBR) to give policy guidelines to the budget makers of the FBR for fiscal year 2021-22.
Sources told Business Recorder that no new tax would be imposed in the next federal budget (2021-22).
The withdrawal of sales tax exemptions, rationalisation of customs tariffs, regulatory duties and additional customs duties, effective enforcement/administrative measures and reduction in the number of withholding taxes would be some of the policy measures for the next fiscal budget.
Changes are also expected in the federal excise regime to increase the federal excise duty (FED) on various items.
The FBR will also review the sectors enjoying reduced rates of sales tax and propose imposition of standard rate of 17 percent sales tax on these industries/sectors.
There is a possibility of providing tax relief in different slabs for salaried class having monthly salary up to Rs400,000 to Rs500,000 per month.
The incidence of tax on higher slabs of salaried individuals may be increased in the next federal budget (2020-21). The government has already withdrawn 74 corporate income tax exemptions through a Presidential Ordinance.
The date of applicability of withdrawal of exemptions would be made from July 1, 2021.
In the last budget, the total net impact of relief measures of all federal taxes totaled at Rs49.3 billion for 2020-21.
The FBR had estimated that the tax machinery could generate Rs200 to Rs300 billion through effective enforcement and administrative measures.
The FBR will review the sales tax and federal excise exemptions available under the Sixth Schedule of the Sales Tax Act 1990. The possible withdrawal of sales tax exemptions would be part of the budget exercise to be started at the FBR.
Dr Waqar Masood has reportedly said that the government was reforming the withholding tax regime.
There are only 15 meaningful withholding taxes.
The government would abolish 40 withholding taxes in the next two fiscal years, so the total number of withholding taxes would be brought down from 65 to 25 taxes, starting from the upcoming budget for 2021-22.
However, the information collection would continue from these transactions to be made part of the FBR database, he added.
The sales tax and the federal excise budget proposals (2021-22) would have a special focus on eliminating tax fraud, fake and flying invoices, plugging loopholes, and facilitating genuine taxpayers.
According to the FBR, Board has invited the proposals for the coming budget for fiscal year (2021-22) relating to Sales Tax and Federal Excise, on the following broad parameters: (i) The proposals should focus on broadening the tax base and increase in revenue; (ii) Amendments may be suggested in any of following laws/rules etc: (a) Sales Tax Act, 1990 Federal Excise Act, 2005 Sales Tax Rules, 2006 Federal Excise Rules, 2005 ICT (Sales Tax on Services) Ordinance, 2001.
The FBR stated that the amendments may be suggested with a view to achieve simplification, remove difficulties and anomalies, and to abolish any outdated/obsolete provisions.
The FBR is considering proposals for eliminating tax fraud, fake and flying invoices, plugging loopholes, if any, facilitating genuine taxpayers and making the procedures transparent; and the proposals should be made keeping in view the consequences for the other related trade groups, which might be adversely affected by the proposed measure.
The FBR stated that the input/suggestions in the following policy areas shall be highly appreciated: Broadening of tax base for a wider participation in revenue generation efforts; taxation of real Income on progressive basis; Phasing out of tax concessions and exemptions; Removal of tax distortions and anomalies; facilitation of taxpayers and ease of doing business; promoting equity in taxation by introducing measures where incidence of tax is higher on affluent classes.