The International Monetary Fund (IMF) has asked Pakistan to introduce a single turnover-based registration threshold for all businesses.
Sources told ProPakistani that IMF officials during the ongoing Stand-by Agreement talks asked Pakistan to introduce a single turnover-based registration threshold of Rs. 8.5 million (equivalent to US$ 30,000) for all businesses.
Every business that has over Rs. 8.5 million in sales must be registered with the tax department, sources added.
The IMF has also asked the Pakistani team that the revenue potential for Personal Income Tax (PIT) can be enhanced by reducing the list of exemptions and preferential tax treatment for particular types of individuals or income
Additionally, the tax rates applicable to individuals should be simplified by reducing the number of rate slabs and having a single progressive tax scale, the IMF also communicated this to FBR officials.
Sources said that both sides also deliberated on rationalizing the tax rates for individuals by removing the salaried/non-salaried distinction and reducing the number of rate slabs to no more than four.
Sources claimed that IMF has also asked FBR to review the Second Schedule and Chapter III of the ITO (Part IX and X), to eliminate or reduce the preferential treatments to fringe benefits to employees in specific sectors, Tax credit for investment in shares, Deductions for mortgage payments, Tax reduction to full-time teachers/researchers and maintain the zero-rate threshold at the same level if it is not possible to reduce it.
According to lender estimates, these measures are estimated to yield 0.5 percent of GDP in additional revenue.
Sources added that the IMF has also asked the Pakistani team to either tax pension contributions or benefits. To this end, it asked to eliminate the benefit of the deduction of voluntary payments to workers’ participation funds and also eliminate the exemption of pensions and tax them by applying one of the alternatives described.
