Islamabad:
The International Monetary Fund has reduced its focus on the new budget for mainly additional fiscal measures and rebalance the Prize of the National Finance Commission, since the Government struggles badly to find space to provide relief to the wage class and the real estate sector.
The salaried class has been more affected than, according to the new details, paid a historical record of RS437 billion in income taxes in just 10 months of this fiscal year. The amount is higher in RS150 billion compared to last year.
The IMF, on Thursday, urged the Pakistani authorities on Thursday to listen to their experts instead of trusting the arguments about land realities or the tax theory of the Laffer curve, sources said. The Pakistani authorities mentioned low income due to the high tax rates, which the IMF did not appreciate, they added.
During a separate session, the IMF also raised questions about the operation of the Federal Revenue Board to reduce taxes for wage class, government sources said. They added that the IMF was of the opinion that the reduction proposed in the rates for the wage class can result in a much greater relief than the one claimed by the Government. The FBR was now in the process of remakeing taxes to the salaried class.
The sources said that during the start meeting with the Minister of Finance, Muhammad Aurengzeb, on Thursday for the approval of the budget, the IMF outgoing mission chief, Nathan Porter, reduced the approach of his mission to four areas.
The highest priority of the IMF would be the income measures to support the tax objective of RS14,307 billion and rebalance the distribution of fiscal resources under the NFC without affecting the constitutional scheme. The sources said that the other two areas of interest during the conversations will be any saving of government reduction and the privatization agenda in the next fiscal year. ]
The provinces obtain 57.5% of actions in federal taxes and the government was trying to stop some of the sums without amending the Constitution. During a meeting last week, a cabinet minister had recommended to obtain 50% of the additional defense expense of the provinces due to an increase in the requirements after the naked hostilities of India against Pakistan.
The IMF team practically began discussions about Türkiye’s new budget on Wednesday. The team plans to travel to Islamabad next week for the last round of conversations that end on May 23.
The sources said that during the starting meeting, the Pakistani authorities raised the issue of the highest tax rates that lead to a low collection in certain areas. However, the IMF out -of -the -out -bass head advised listening to his experts. The IMF team did not seem impressed by the economic theory of Laffer Curve.
During a meeting related to tax with the FBR, the authorities shared the proposal to reduce taxes for wage class. The sources said the Government proposed to increase the exemption threshold of the income tax of RS600,000 to RS1.2 million per year.
He also proposed to establish new slab rates of 10%, 25%, 33%and 35%, while adjusting the income levels where these slabs will enter into force. However, the IMF’s point of view was that this would significantly abolish income.
According to the new details, salaried people paid a fiscal record of RS437 billion during the July-April period of this fiscal year, which was 150 billion rupees more than the last fiscal year. With two remaining months, the additional contribution would increase to around RS190 billion compared to RS75 billion that the Government had claimed in June last year.
The merit guarantees that the load of the salaried class should be reduced by at least RS100 billion, since anything lower than that would not end discrimination with the class.
The sources said the government did not have enough fiscal space to give significant relief to the real estate sector. The initial proposal is to reduce the tax retention taxes and purchase of the properties in just 0.5% each. The FBR wanted to reduce taxes, these should be treated as a final responsibility, but the finance minister asked to keep them adjustable.
There was also a proposal to introduce a new Slab of the Capital Profit Tax for the highest property profits, the sources said.
This week, discussions also took place within the government to reduce the sales tax on packaged milk. Some FBR members proposed to reduce the rate from 18% to 15% or 17%. However, no decision was made with a senior official who suggested to maintain the rate without changes.
The 18% sales tax on packaged milk is the highest in the world despite the greatest malnutrition in Pakistan. While making a decision on milk reduction, FBR officials did not have a clear idea about the price of milk packaged in the market.
The tax authorities had also proposed to slap the Federal Special Tax on cookies, but there was no agreement on that within the government. The proposal to slapped a new tax on cookies and discuss at the level of the Minister of Finance shows the insensitivity of the government.
The sources said that the Government was also considering two options regarding the withdrawal of the tax free of taxes from the old tribal areas administered at the federal level. A proposal was to introduce the standard rate of 18%, while the second proposal was to introduce a 10%rate, the sources said. However, the final decision will be taken by the main leadership of the PML-N, the sources said.
