Revised Slabs on Salaried Class to Bring in Additional Rs. 125 Billion in FY23

The Chairman of the Federal Board of Revenue (FBR), Asim Ahmad, said on Saturday that the net revenue impact of the taxation measures taken in the federal budget (2022-23) is expected to be increased from Rs. 355 billion to Rs. 480 billion following a rise in the income tax rates for the salaried class of Rs. 125 billion for 2022-23.

At the conclusion of the Senate Standing Committee on Finance on Saturday, FBR Chairman informed the media at the Parliament House that the figure of the revenue measures is bound to rise after the changes in the tax rates of the salaried class through the amended Finance Bill 2022. However, it depends on the final estimates of the figure projected from personal income tax reforms.

The issue involved in the taxation of the salaried class is not revenue generation but the reforming of the tax slabs. It is very easy to impose additional taxes of Rs. 150 billion on other sectors but the issue involved is to reform the structure of the tax slabs of the salaried class.

The Personal Income Tax Reforms have been pending since 2019 and were deferred every year for various reasons. Now, the tax slabs are being adjusted in such a manner to ensure minimum burden on the lower brackets of the salaried class, Ahmad added.

When asked whether the FBR can generate additional taxes of Rs. 125 billion from tobacco, steel, beverages, and other potential sectors, Ahmad responded that the question is not about generating additional revenue from the salaried class but about the reform of the tax slabs of the salaried individuals falling under different brackets.

During the meeting of the Senate Standing Committee on Finance on Saturday, FBR Member Inland Revenue (IR) (Policy) informed the committee that the FBR has taken a revenue generation measure to increase the advance rate from one percent to two percent on the sale and purchase of property for filers. This is an adjustable tax and refundable. The revenue measure has been taken to tax the wealthy people.

The Chairman of the Committee, Senator Saleem Mandviwalla, stated that the FBR should draft a threshold for the collection of advance tax on immovable properties so that small houses and small properties may be excluded from the purview of this tax.

To a query, FBR Chairman informed the committee that the recommendation to increase tax on advertisements starring foreign actors was moved by the Ministry of Information. However, the committee approved recommendations on the increased taxation on advertisements having foreign actors.

The committee rejected proposals to impose income tax on the allowances received by the pilots of any Pakistani airline, flying allowances, and submarine allowances. The FBR has made allowances part of the salary for taxation.

The FBR Member IR (Policy) informed the committee that the total revenue of Rs. 5 billion will be generated in 2022-23 after the removal of different kinds of tax credits under the Finance Bill 2022.

The Finance Committee deferred the income tax exemption proposed to Karandaaz Pakistan from the tax year 2015 onwards until the Economic Affairs Division (EAD) submits the details about the working of the said NGO.

The Chairman FBR mentioned that the FBR had taxed Karandaaz from the tax year 2015 onwards. However, the Appellate Tribunal Inland Revenue has given an order against the FBR. Resultantly, the entire tax demand raised against the said institution was deleted. The FBR has raised the tax demands since 2015 and the whole demand was revered by the Appellate Tribunal.

“We have lost the case against the Karandaaz involving an amount of Rs. 300-350 million and now this amount has become refundable,” the Chairman said.

When the committee members asked about the nature of the working of Karandaaz, FBR high-ups responded that the EAD is the most appropriate government department to respond to this query. The committee deferred the proposed income tax exemption to Karandaaz and directed the EAD to attend the next meeting and explain the position.

Senator Mandviwalla asked the FBR to share a detailed table specifying all the taxes applicable on mobile phones. The committee was happy to clear the proposal of restriction on the frequency of audits to once in four years.

A committee member asked whether this decision would also apply to the audit cases selected by the Commissioner of Inland Revenue, to which the FBR Member IR (Policy) affirmed that it would apply to cases selected for audit by the Commissioners.

After a presentation at the Pakistan Pharmaceutical Manufacturers Association, Ahmed revealed that he has called for the issuing of sales tax refunds manually to the pharma companies to be started until the removal of difficulties.

“We have resolved the refund-related issues in this sector and a technical bug in the system has been removed. The FBR has received 15-16 applications for refunds filed by the pharmaceutical companies. One refund application has also been processed,” he explained.

Senator Mandviwalla stated that at the time of the mini-budget, the former FBR Chairman, Dr. Ashfaq Ahmad, had assured of the payment of refunds to the pharma sector within 84 hours.

“However, we have repeatedly agitated that the FBR would now be able to fulfill its promise and cannot issue refunds within 48 hours period under the FASTER-Pharma,” he said.

FBR officials also revealed that the Drug Regulatory Authority of Pakistan (DRAP) is not cooperating with the FBR to share the list of the raw materials, active pharmaceutical ingredients (APIs), and medicines registered with the latter to verify whether the input imported was consumed during the manufacturing of the drugs registered with it. The FBR’s system has to read and subsequently verify whether a drug is registered.

Furthermore, the representative of the Pharma association mentioned that the FBR has not paid a single refund under the FASTER-Pharma for the last four and a half months.