Sunday, October 01, 2023

Caretakers mull imposing wealth tax on moveable assets

Govt also considers amending taxation regime for retail, agriculture, and real estate sectors

A representational image. — Canva
A representational image. — Canva

  • Cabinet Committee informed of proposals under consideration.
  • FBR also plans to introduce simplification of tax returns, withholding tax.
  • FBR estimates gap of Rs5.6 trillion due to tax compliance, weak enforcement. 

ISLAMABAD/ KARACHI: The caretaker government is mulling amending the taxation regime for retail, agriculture, and real estate sectors and imposing a wealth tax on moveable assets, reported The News citing sources.

“The caretaker government has plans for materialising the FBR’s tax collection target of Rs9.2 trillion and increase tax-to-GDP ratio to 15%, equivalent to Rs13 trillion, over the next two years,” sources told the publication.

The Cabinet Committee on Economic Revival (CCER) was informed that the government is considering amendments to the taxation regime for retail, agriculture, and real estate sectors and imposing a wealth tax on moveable assets.

The government is also mulling taking back the exemptions given on three major taxes to the influential segments and powerful lobbies to the tune of Rs1.3 trillion per annum. The taxation plan is being considered by both the federal and provincial governments, keeping in view the fiscal arrangements enshrined in the 1973 Constitution.

The rationalisation of Capital Gains Tax (CGT) on immovable property is also on the cards which would mean that the rate might be increased further in a bid to jack up the tax-to-GDP ratio in the country.

The country’s highest tax collecting authority may move an ordinance for promulgation if a broader consensus is developed.

The publication also reported that the FBR plans to introduce simplification of tax returns and withholding tax regimes. It is also hopeful of getting an additional Rs 3 trillion of pending court cases are resolved.

The government’s internal working shows the tax-to-GDP ratio stands at 9.6% of which the FBR’s tax-to-GDP ratio stands at just 8.5% with annual collection of Rs7.4 trillion in the last financial year. The FBR has proposed tax collection of Rs13 trillion, equivalent to 15% of GDP, over a two-year period.

“The FBR has estimated a gap of Rs5.6 trillion on account of tax compliance and weak enforcement and compliance,” said an FBR official told The News.

He also shared that the govt could raise increase tax revenues by Rs3 trillion if it improves General Sales Tax (GST), Rs1.8 trillion through Income Tax and Rs0.8 trillion through Customs Duty (CD) and Federal Excise Duty (FED).

The publication reported that currently the FBR is collecting Rs2.9 trillion through GST, but there is potential to jack it up to Rs5.8 trillion.

On the Income Tax, the FBR is collecting Rs3.3 trillion and there is a gap of Rs1.7 trillion if it is improved then the collection may go up to Rs5 trillion. In the shape of Customs Duty and FED, the FBR has been collecting Rs1.3 trillion, and there has been a gap of Rs0.9 trillion. Collection can go up to Rs2.2 trillion on annual basis.

Analysis shows there was a compliance gap of Rs1.6 trillion and Rs1.3 trillion on account of policy in the shape of GST on annual basis.

On the Income Tax side, there has been a compliance gap of Rs1.2 trillion and Rs0.5 trillion in the shape of policy. There has been a compliance gap of Rs0.2 trillion in Customs Duty and FED and Rs0.7 trillion in the shape of policy.