Mr. Speaker,
(i) Tax on deemed rental income
The major part of the wealth of rich people is parked in the real estate sector in Pakistan. This is a double-faceted menace. It leads to the accumulation of unproductive assets and raises the prices of housing for the poor and lower-income groups. We intend to correct this imbalance. Therefore, all persons who have more than one immovable property exceeding Rs.25 million situated in Pakistan shall be deemed to have received rent equal to 5% of the fair market value of the immovable property and shall pay tax at the rate of 1% of the fair market value of the said property. However, one house of each individual will be excluded.
(ii) Tax on transactions of immovable properties
The current challenging times in Pakistan warrant huge sacrifices from the rich and affluent. It is about time that the privileged and affluent sections of society must come forward to play their pivotal role in the socio-economic development of Pakistan. We intend to provide a taxation structure where all classes of assets are taxed in an equitable manner. Unfortunately, our present taxation regime provides incentives for unproductive investments and taxes heavily the productive sectors. In order to correct this, capital gain all classes of assets is now proposed to be taxed at 15% in case, the holding period of such property is one year or less. The capital gain payable on such assets will reduce to zero after a holding period of 6 years, reducing tax liability by 2.5 % with each subsequent year.
Furthermore, the advance tax rate on the purchase and sale of property for filers is proposed to be enhanced to 2% from the current 1%. Moreover, in order to discourage the undocumented economy, the advance tax rate for buyers of immovable property who are non-filers is proposed to be enhanced to 5%.
(iii) Tax on High Earning Persons
Mr. Speaker,
Pakistan is passing through unprecedented economic conditions. It’s time our rich should come forward and pay taxes. In order to shift the tax burden from poor to rich, all persons inclusive of companies and associations of persons, earning an annual income of Rs. 300 million or more, are proposed to pay 2%tax.
(iv) Increase in advance tax on luxury vehicles
In continuation of our policy to shift the burden of tax on the rich class, advance tax on motor vehicles exceeding 1600cc is proposed to be increased. Furthermore, advance tax shall also be collected at the rate of 2% of the value in cases of high value hybrid and electric vehicles. Additionally, the rate of tax for non- filers shall be enhanced to 200% from the current 100%.
(v) Tax on windfall profits
The banking sector has earned windfall gains due to higher interest rates and risk-free investment in Government securities. In order to capture the real tax potential, the tax rate on banking companies is proposed to be enhanced to 45% from the current 39% inclusive of super tax.
I now present proposals regarding streamlining and enhancing documentation of economy
(vi) Criteria for becoming tax resident in Pakistan
Criteria for the resident person for the purpose of taxation are being modified. The current regime is being misused by wealthy individuals whereby they are not tax residents of any country therefore it is proposed that any citizen of Pakistan who is not a tax resident of any other country shall be treated as a tax resident of Pakistan.
(vii) Advance tax on international card payments
Advance withholding tax at the rate of 1% for filers and 2% for non- filers shall be collected from persons remitting money outside Pakistan through credit, debit, and prepaid cards. However, this tax shall be adjustable against tax liability.
(Sales Tax & Federal Excise Measures
Mr. Speaker,
- Coming to indirect taxes, Inland Revenue collection has shown a healthy growth in the overall tax collection of FBR.
- Keeping in view the requirement of meeting the fiscal deficit, it is imperative that the government takes tough decisions for the overall benefit of the country and the government under the leadership of PM Shehbaz Sharif has practically demonstrated that it has the capacity and will to take such decisions. Sales Tax is the backbone of revenue collection. But as per the vision of the PM, the present budgetary proposals aim to tax the sectors that have either remained out of the tax net or hovered in the periphery and not paid taxes as per the actual capacity.
While the government wants to collect its due share of taxes by broadening the base and focusing on previously un-attended sectors, in tandem with the vision of the PM, the government also wants to extend due relief in taxes, the effect of which will trickle down to common man.
Pakistan is suffering an acute shortage of energy. Thermal energy is expensive due to skyrocketing fuel prices. Renewable energy is the possible way forward. It is proposed to exempt import and local supply of solar panels from sales tax. Besides, consumers using fewer than 200 units of electricity will be facilitated in obtaining soft loans on easy terms from the banks for the purchase of solar panels. This will not only promote eco-friendly use of energy but also save precious foreign exchange spent on the import of fuel and gas.
In order to facilitate agriculture, it is proposed to withdraw sales tax on the supply of tractors, agricultural implements, and various seeds including wheat, rice, maize, sunflowers, canola, and rice.
Charitable hospitals are contributing substantially to providing health facilities. It is proposed to extend complete exemption on import/ donations to charitable hospitals and local supplies including electricity to charitable/ non-profit hospitals with 50 or more beds.