ISLAMABAD: The Federal Board of Revenue (FBR) has suggested to increase the minimum tax rate on companies and individuals by at least by 25 per cent.
Under the FBR’s proposal, the tax rate could be increased to 1.25 per cent in upcoming budget from the current 1 per cent. Contrary to the FBR’s proposal, the Tax Reforms Commission (TRC) has suggested to slash current rate by 50% for the upcoming budget.
Corporate entities having an annual turnover of over Rs10 million are bound by law to pay a minimum 1% of its sales in taxes – irrespective of whether it was earning a profit or not. Sources said if the FBR’s proposal is approved, at least 7,000 companies will be affected. At present, around 24,000 companies are filing their returns and about 30% of them are showing losses. Another 39% showed ‘no profit and no loss’ in the tax year of 2015.
The proposal suggests that in the upcoming fiscal year, the FBR will rely on the existing tax base to extract more instead of widening the base.
In the previous four budgets of the present government, the revenue on the back of new taxation measures grew by Rs1.2 trillion. The tax collection increased from Rs1.956 trillion in June 2013 to Rs3.114 trillion by June 2016, which was exactly equal to the level of new taxation.
