Islamabad:
Four days prior to the approval of RS435 billion values of tax measures announced in the budget, the government on Sunday proposed a RS36 billion mini-budget and facilitated restrictions on larger purchases of individuals with insufficient declared assets.
The revised criteria aim to tackle public concerns about the negative impact of the previous carpet ban on economic activity from unjustified persons.
With the introduction of a mini-budget before the planned approval of the 2025-26 budget on Thursday, the government has introduced the total new taxes worth the RS462 billion. New taxes have been charged with a day’s old chicken and rates have been increased for corporate investment in mutual funds and earnings from investment in government debt.
The government has also agreed to relax the criteria for banning financial transactions, such as buying a home, plot, car, investing in securities and maintaining a bank account of those whose declared assets do not support these purchases. It would have proposed to ban all such transactions if the declared assets do not support these purchases.
The government has now suggested that non -eligible criteria will not apply if the value of a car is up to RS7 million. The unbalancing criterion will apply when purchasing over100 million commercial plot and over 50 million RS housing property.
The condition of unbalancing will be applicable if the cash account cash is more than RS100 million a year in all bank accounts for an individual. The unbelievement condition of stock market investments would be applicable if the cumulative investment in one year is more than RS50 million.
These limits are set on the assumption that Pakistan’s 5% richest avoids taxes and the rest of the 95% do not have financial muscles to make large investments.
The new tax measures were submitted for the National Assembly Standing Committee on Funding, which approved the government’s proposal. PPPS SYED NAVEED QAMAR was chairman of the committee meeting.
The Federal Board of Revenue has proposed RS36 billion.
In one step that will further increase the prices of chicken in the country, the government has proposed to beat the federal excise tax equal to RS10 on a one-day old chicken. It has proposed amendments to the Federal Excise Act, 2005 to introduce the new tax.
Last month, the International Monetary Fund (IMF) had rejected the government’s proposal to introduce a 5% federal excise duty on one-day old chickens. The IMF representative had pointed out that FBR, on the one hand, claimed that there were high taxes on food in Pakistan, and on the other, it recommended such proposals.
Chairman FBR Rashid Langrial said the standing committee that the new tax targets of RS36 billion aimed to compensate the tax deficit due to reduction in the turnover tax rate for the solar cell panels and finance the increase in wages.
The National Assembly’s standing committee procedure remained mostly smooth. Syed Naveed Qamar, Rashid Langrial and newly appointed Prime Minister for Financing Bilal Kayani ruled the committee in the presence of powerful resistance. It was for the first time that the Na Standing Committee discussed and approved the budget.
PTI’s two members of the National Assembly Arif Mobeen Jutt and Usama Mela played a very constructive role in the control of tax measures also recognized by Finance Minister Muhammad Aurangzeb.
In the budget, the government had announced 18% VAT by importing solar panels. After reaching an understanding with Pakistan Peoples Party, Deputy Prime Minister Ishaq Dar announced to reduce the rate to 10%. The total estimated turnover from the 18% tax was RS20 billion, which is now projected for RS12 billion.
Likewise, FBR and IMF agreed to reduce the income tax rate for RS100,000 monthly salary income from 5% to 1%. The Ministry of Finance had also proposed a 6% increase in wages. Prime Minister Shehbaz Sharif decided to increase wages to 10% at the cabinet meeting, which was held one hour before the budget announcement.
The Prime Minister also decided at the same cabinet meeting that in order to finance the extra increase in wages, the tax on the lowest plate had to be increased to 2.5%.
Secretary Financing Imdadullah Bosal had against increasing this tax to 2.5%. Now the income tax rate for the lowest income plate of RS100,000 will be 1%, and in order to finance the wage increase, the government has taken three measures.
The National Assembly’s Standing Committee for Funding also agreed to increase the income tax rate from 25% to 29% on dividends received by a company from mutual funds that distribute income from debt profits.
It has also proposed to increase the withholding tax from 15 to 20% on the profits on investments in the government’s securities of institutional investors.
Finance Minister Muhammad Aurangzeb had announced RS435 billion new measures in the budget, including the introduction of RS2.5 per year. Liter of carbon tax and up to 3% car motor tax. Out of RS435 billion, FBR related tax measures were RS312 billion.
After adjusting the negative effect of the solar panel tax, cumulatively, the government has imposed RS462 billion worth new tax measures in the budget. It has set FBR’s annual tax target for RS14.13 trillion for the next financial year, which can be achieved on the back of these measures and the promised enforcement of FBR.
Currently, there is 15% income tax in the event of mutual funds, investment in real estate. It has now been decided that there will be 15% income tax in the event of investment in real estate, 25% in the event of mutual funds, conditional on proportional income derived from average annual investments in debt papers and shares and 29% income tax on dividends received by a company from mutual fund derived from income from debt profit.
Likewise, there will be 20% tax on the dividend or profits paid for by a banking company or a financial institution in an account or deposit maintained with such a business or institution; and 20% of the yield or profits on the state securities paid to any person other than an individual.
The National Assembly’s Standing Committee for Funding also approved Finance Bill 2025-26 with certain recommendations, forwarded by the Senate Standing Committee for Finance and recommendations from the NA Finance Committee.
The FBR chairman said the government had shared six new tax measures with the IMF. Out of these six measures, three are approved by the IMF.
The government has also decided that a uniform VAT of 10% would be imposed on imported and local cotton aimed at tackling a deviation that created problems for the local industry.
