Latest news with #Rs389
Business Recorder
14-06-2025
- Business
- Business Recorder
IMF nod needed for every tax-related proposal, says Langrial
ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial has said that the government has to obtain approval from International Monetary Fund (IMF) for every tax-related proposal including any exemption, reduction in tax rates or any changes in tax regime. During a briefing to the Senate Standing Committee on Finance and Revenue, Langrial stated that the IMF has agreed to the FBR's proposal to generate Rs389 billion through enforcement measures during next fiscal year. Langrial stated that the IMF is closely monitoring the country's tax collection performance, adding that weekly meetings would be held between FBR officials and IMF to monitor results of enforcement measures. Rs17.6trn FY26 Budget unveiled under the shadows of IMF conditions, US tariff tensions and war threat The issue came to the light when a private stakeholder raised the issue of expiry of exemption available to real estate investment trust (REIT) one year back. Chairman FBR has sought time from committee on Senators' proposals, whereas, the finance minister also endorsed the proposals of the senators. Secretary, Ministry of Commerce also briefed the Senate Standing Committee on Finance that the new policy proposes four tariff slabs (0, 5, 10, 15) designed to support local industries. Finance Minister Muhammad Aurangzeb told the committee that under the new tariff structure, import duties on raw materials and intermediate goods will be reduced in the first year. This is part of a broader industrial support package, adding he said that lower input costs will help reduce the overall cost of production. Previous governments had imposed high import duties in an attempt to curb imports, but the strategy yielded limited results in terms of long-term economic benefit, he added. Chairman FBR Langrial added that past increases in tariffs were often used to protect inactive or inefficient industrial units, which ultimately distorted market competition and discouraged innovation. The chairman of the Senate Finance Committee emphasised the urgency of bringing down production costs, particularly in comparison to regional competitors such as India and Bangladesh, where exporters enjoy significantly lower electricity tariffs. 'Pakistani exporters are burdened with high energy costs, which puts them at a disadvantage in global markets,' he remarked. Finance Minister Aurangzeb assured the committee that the government is committed to reducing the cost of doing business. Electricity rates for industries have already been lowered and interest rate is expected to drop below 10 per cent in the upcoming fiscal year. The government is also working on resolving industrial tax issues. He said that Prime Minister Shehbaz Sharif has established a dedicated committee on tariff reform, which will continue to work on long-term structural changes to make Pakistan's tariff regime more competitive and growth-oriented. Copyright Business Recorder, 2025
Business Recorder
14-06-2025
- Business
- Business Recorder
Tax gap touches Rs7.1trn mark: FBR says Rs389bn enforcement steps hinge on parliament nod
ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, Friday, disclosed before the National Assembly Standing Committee on Finance that the tax gap has reached Rs7.1 trillion in 2024-25 and approval of parliament is needed for enforcement measures of Rs389 billion, and help of provinces to increase tax-to-GDP ratio. On Friday, Minister of State for Finance and Revenue and Chairman FBR presented an overview of Finance Bill proposals and a summary of the FBR Transformation Plan. The FBR chairman disclosed that the FBR has suffered Rs0.5 trillion tax losses due to smuggling from borders, especially smuggling of petroleum products from Chagai district in Balochistan. He informed the committee that FBR has developed an ambitious transformation plan, which will be implemented from December 2025. He said that FBR's real tax, after adjusting for inflation and real GDP, has been one per cent from 2016-18 and -0.3 per cent from 2018–24. He added that Pakistan faces a tax gap of Rs7.1 trillion in 2024–25 and also lags behind peers in the tax-to-GDP ratio. The FBR's revenue as percentage of GDP stood at around 10.4 percent to 10.5 percent. Break-up of tax gap revealed that sales tax gap stood at Rs3.4 trillion, income tax gap Rs2 trillion, customs duty gap Rs0.5 trillion, totalling to Rs5.9 trillion. After including enforcement gap, autonomous growth and other factors, total tax gap stood at Rs7.2 trillion during 2024-25, the FBR chairman said. There is an urgent need to request provinces to help in raising tax-to-GDP ratio. Referring to the importance of enforcement, the FBR chairman said that the FBR has collected Rs50billion extra revenue from the sugar industry during the current year despite less production. This extra Rs50 billion has been collected without any change in tax rates on sugar industry. The digital integration exercise resulted in registration of 1,812 businesses having annual turnover of Rs11.8 trillion. A total of 489 companies are in testing phase and 42 companies are now digitally live. During the meeting, the finance committee expressed serious concern over the increase in tax on profits. The committee chairman directed the FBR to minimise the tax on profits of small depositors. The committee opposed the gradual withdrawal of the extension to the exemption for FATA/ PATA. Chairman Syed Naveed Qamar considered it an economic assassination of small-scale businesses in the area. He directed the FBR to reconsider the withdrawal and provide relief to the locals. The FBR chairman updated the committee on a series of reforms, but noted a lack of enforcement. He said that a Delivery Unit has been set up to drive transformation interventions with all stakeholders. A roadmap is in place to deliver transformational impact by the end of the year. He updated the committee on the Digital Production Tracking, Digital Invoicing, Digital Enforcement Stations, Cargo Tracking System, and Faceless Assessment System. The Minister of State for Finance and Revenue and the Chairman FBR also briefed the committee on potential concerns and justifications. He updated the committee on the current budgetary position, revenue receipts, target for FY 2025–2026, summary of income tax measures, summary of sales tax measures, relief for salaried individuals, relief in super tax, rationalisation in rates of advance tax on rendering of services to non-residents, reintroduction of tax credit for housing loans for small residences, gradual withdrawal of extension to exemption to FATA/ PATA, allowance to coal miners in Sindh to sell to buyers other than IPPs, dividend tax on mutual funds, tax on e-commerce transactions, and an increase in advance tax on cash withdrawals by non-filers. Some committee members raised issues with the Faceless Assessment System in Karachi, citing complaints of high charges, delays in examination and reviews, which caused significant demurrages. The members also complained about the misuse of the Digital Production Tracking and Digital Invoicing System. They stated that the Digital Production Tracking system makes errors in distinguishing between old, used, and scrap material. The FBR was; however, of the view that there are reports of usable material being misrepresented as scrap. Chairman Qamar observed that the digital enforcement station plan may choke port points and that the cargo tracking system will create practical issues. He observed that the mortgage culture has not yet been introduced in the country. He emphasised the need for the FBR to simplify the process of tax credits for housing loans. He directed the FBR to provide a specific table of options with thresholds for the committee's consideration. The committee expressed serious concern over the increase in tax on profits and tax on cash withdrawals. The chairman directed the FBR to minimise the tax on profits of small depositors. The meeting was attended by Omar Ayub Khan, Rana Iradat Sharif Khan, Syed Samiul Hassan Gilani, Ali Zahid, Zeb Jaffar, Muhammad Usman Awaisi, Dr Mirza Ikhtiar Baig, Dr Nafisa Shah, Sharmila Sahiba Faruque Hashaam, Ali Jan Mazari, Muhammad Jawed Hanif Khan, Arshad Abdullah Vohra, Muhammad Ali Sarfraz (on Zoom), Muhammad Mobeen Arif, Usama Ahmed Mela, and Shahida Begum, MNAs. The meeting was also attended by the Minister of State for Finance and Revenue, Secretary Revenue Divisions, Special Secretary Finance and other senior officers from both the divisions. Copyright Business Recorder, 2025
Express Tribune
13-06-2025
- Business
- Express Tribune
Taxman told to enhance skills
In a major development, a National Assembly panel on Thursday linked approval of legal amendments to ban economic transactions by ineligible persons with tax machinery's ability to develop an independent and credible online platform to determine real value of people's assets. The condition came a day after Finance Minister Muhammad Aurangzeb said that the government may have to take Rs500 billion worth more tax measures, if the National Assembly did not approve the law to ban the economic transactions. The committee would not pass the amendments related to the economic transactions until the members are satisfied that the Federal Board of Revenue has developed an independent and reliable online platform to assess people's assets, said Standing Committee on Finance Chairman Syed Naveed Qamar. The government has proposed that only those people can buy cars, plots, invest in securities who have sufficient declared white legal resources to buy these assets and maintain bank accounts The finance minister again reiterated on Thursday that the IMF has accepted Rs389 billion in collections on account of improved enforcement in the next fiscal year and for that the new legal powers were needed. The National Assembly Standing Committee on Finance had last month linked the approval of the bill to ban economic transactions with the government's ability to develop a credible online mechanism where the eligibility criterion can be independently determined and verified without harassment by the taxmen. PPP's MNA Mirza Ikhtiar Baig raised the issue of first assessing the credibility of the new platform to make sure that the taxpayers are not harassed by the FBR. Finance Secretary Imdad Ullah Bosal announced before the committee that the government has decided to give a 50% special relief allowance to all officers of the armed forces and 20% to other soldiers, in a move that acknowledges their contributions in defense of the nation. This brings the total increase in the salaries of officers of the armed forces to 60% and to 30% for other soldiers after incorporating the impact of the regular increase in their salaries announced on June 10. The announcement was made before the National Assembly Standing Committee on Finance and Revenue that on Thursday began discussions on the Finance Bill 2026, which is the real budget. The government has given special relief allowance equal to 50% of the basic pay scale to the officers and 20% to junior commissioned officers and soldiers, said the Secretary Finance. The Leader of the Opposition in the National Assembly Omar Ayub Khan, who is also a member of the standing committee, asked about the fiscal impact of the special relief.
Express Tribune
12-06-2025
- Business
- Express Tribune
Assured confusion
Listen to article This is perhaps the first budget in history which is at the cusp of a mini-budget even before being legislated. The euphoric order that it has laid by forecasting growth at 4.2% – at a time when all plum chips of production, agriculture, exports and FDIs are in disarray and tax collection is stagnated – is nothing but a proposition jotted down in economic non-viability. Moreover, the Rs17.573 trillion layout categorically suggests that it will come down hard on spending, having already gone to the extent of unduly taxing revenue generating digital marketplaces, solar panels, cars and fuel, as well as agrarian tractors. The point is that there is a serious flaw in budget-making, and the finance minister's proposal to raise new taxes to the tune of Rs432 billion is in doldrums. The obstacle has come from forces of status quo and they are the parliamentarians themselves! The warning from the finance wizards that revenue numbers are already locked with the IMF, and in case of non-legislation of the proposed "restrictions on economic transactions by ineligible persons lacking sufficient financial resources", the government will have to impose an additional Rs500 billion worth of new taxes. This is where the supra-mini budget is on the cards. So, what's next? And what if the IMF refuses to listen to our pathetic post-budget tale? Under a deal, as the second tranche of loan was released, the Fund was assured that at least Rs389 billion worth of new taxes should be raised through "enforcement measures", which is not possible without new legislation. The relevant House committee is already raising a hue and cry, and the prevalent partisanship in the coalition makes it an untenable order. The government has exhibited selectiveness by unnecessarily appeasing the parliamentarians with a six-fold increase in salaries, and raising their developmental funds to the tune of Rs70 million each. For them, the FinMin acted as the devil's advocate too. On the other hand, the government slapped a 2.5% deductable tax on the first slab of salaried class and failed to raise minimum wages this year. This waywardness is toiling and pushes the budget to the cliff.
Express Tribune
12-06-2025
- Business
- Express Tribune
Govt hints at Rs500b mini-budget
Listen to article Finance Minister Muhammad Aurangzeb on Wednesday cautioned that the government may be compelled to impose up to Rs500 billion worth more new taxes if the National Assembly did not allow it to ban economic transactions by ineligible persons. The minister also made a paradoxical comment where he defended the decision to keep the minimum monthly wage unchanged at Rs37,000 but advocated an annual increase in salaries of the parliamentarians to adjust for the impact of inflation. The warning about a mini-budget before the approval of the new budget came just a day after the finance minister proposed roughly Rs432 billion worth of new taxes, which targeted the digital economy, solar panels, middlemen's cars and fuel, including that used in agriculture. He made the remarks during a post-budget press conference where he expanded upon the federal budget proposed for the new fiscal year. If the law to ban economic transactions is not passed and the enforcement measures are not implemented, we will have to impose Rs400 billion to Rs500 billion worth of new taxes, repeated by the finance minister twice to register his point. "We have two ways — either we ensure enforcement or we introduce additional measures of up to Rs400 billion to Rs500 billion. This is why we will go to the parliament to help us out with the enabling amendments and legislation", he added. He said that the International Monetary Fund has accepted the government's point of view that it can get Rs389 billion additional in the next fiscal year through enforcement measures, which is not possible without new legislation. Transactions to be banned In the budget, the government has proposed restrictions on economic transactions by ineligible persons lacking sufficient financial resources. These restrictions include: a ban on booking, purchasing, or registering motor vehicles; a ban on registering, recording, or attesting the transfer of immovable property; a ban on selling securities — including debt securities or mutual fund units — to ineligible persons; and a ban on opening or maintaining current, savings, or investor portfolio securities accounts. Only individuals holding 130% of the value in cash and equivalent assets — comprising local or foreign currency, fair market value of gold, net realisable value of stocks, bonds, receivables, or any other cash-equivalent asset — will be eligible to buy such assets. Rs37,000 minimum wage appropriate In a surprising statement, the finance minister defended the decision to freeze the minimum wage at Rs37,000 per month — or Rs1,423 per day, excluding holidays. "Go to the industries and get their feedback on the minimum wage. I think we are in a good place," said Aurangzeb. However, he also defended the substantial hike in salaries of the Senate chairman and deputy chairman, and the National Assembly speaker and deputy speaker, raised sixfold to Rs1.3 million per month. He said their salaries were being adjusted after nine years. Like the annual increment in government employee salaries, parliamentarians' pay should also increase, he recommended. Media protests for its rights At the outset of the press conference, reporters voiced concerns over not receiving a technical briefing from the Federal Board of Revenue (FBR) on the Finance Bill 2025 on Tuesday. They walked out in protest and returned only after Information Minister Attaullah Tarar and FBR Chairman Rashid Langrial acknowledged that such a briefing should have been given as per tradition. Finance Minister Aurangzeb later acknowledged the "worry" caused to reporters and said he "regretted if there was anything of the sort". Cash on delivery disparity The government's move to charge 2% tax on online shopping up to Rs20,000 — while charging only 0.25% for purchases exceeding that amount — is likely to further encourage cash-on-delivery for high-value transactions. Dr Najeeb, FBR Member Policy, explained that while the value of goods in such transactions is high, the profit margins are low, hence the proposed lower tax rate of 0.25%. Under the proposed rates, tax on a Rs20,000 transaction will amount to Rs400, but for Rs21,000 it will drop to Rs52. Dr Najeeb noted that grocery items have lower margins but are taxed at higher rates than electrical goods. "We did not follow previous policies where everyone suffered under the same category," he added. Pakistan's East Asia moment Finance Minister Aurangzeb asserted that reducing import duties would move Pakistan toward an export-led economy. He emphasised the significance of tariff reforms under the National Tariff Policy. "People ask us if revenue will decline. But if we are to take this country forward toward an export-led model, this is the discussion we must have," he said. The minister noted that additional customs duties were eliminated from four tariff lines and reduced for 2,700 more, all linked to raw materials intended to benefit exporters. "This is an East Asia moment for Pakistan. Whatever was available in the fiscal space reflects the direction of travel. We've tried to reduce tariffs. This is not the eventual end state," he remarked. On the increased tax rate for the sale of plots, Aurangzeb said the selling side still receives capital gains, but the buying side should receive some relief. Finance Secretary Imdad Ullah Bosal stated that there was no more fiscal space to reduce expenditure, and savings from downsizing the government were limited to the abolishment of vacant positions. Responding to a question about delinking population statistics from the National Finance Commission (NFC) award, Aurangzeb insisted, "Everything will be done in consultation with provinces." Earlier this week, the finance minister had said that the population should be delinked from the NFC formula to address 2.6% annual population growth. "Nothing will be done without the provinces, including the national fiscal pact," he added. To a question about the impact of reducing the income tax surcharge by 1%, which still leaves it at 9%, on brain drain, Aurangzeb said the government had set a rare direction, one indicating that "anything going up is, within a year, going down". "The things that had never been reversed before have now been put into reversal - but that's not the eventual end state," he said. He clarified that the government is trying to send a message to sectors facing undue burden, particularly the formal sector, that it is "serious". "This is just signalling, from my perspective, in the right direction," he said. When asked about the rationale for imposing an 18% sales tax on imported solar panels, FBR Chairman Rashid Langrial explained that panels were being imported either fully or partially assembled. Those adding value locally were already taxed at 18%, while fully assembled imports were not, putting local assemblers at a disadvantage. "We also closed the door for future local assembly, so this was not an option. We have to create a level playing field," Langrial said, asserting that incentives were no longer needed, given the falling cost of technology. He estimated that the 18% tax on solar panel imports would increase the payback period by only two months, from 18 to 20 months. Eurobond repayments On bond repayments, the finance minister said the first instalment of $500 million worth of Eurobonds is due in September, followed by the next in March. "We are prepared and willing to pay," he said. "With the international credit rating improving, we want to access the euro and US dollar markets, which is expected in 2026, but certainly not this calendar year," Aurangzeb added.
