ISLAMABAD: The Government of Pakistan has unveiled a set of significant changes to its tax policies for the next fiscal year. The reforms are meant to boost tax collections, enhance tax fairness, and facilitate growth in various sectors. The new policy reforms address industries like coal mining, property, banking, mutual funds, pensions, and government securities.
Tax credit revision for Sindh Coal Mines
Coal mine firms in Sindh currently receive a 100% tax credit if they sell all the coal to power plants. The government is now proposing to ease this requirement. Firms would still be eligible for a tax credit, but it would be a different one depending on the amount of coal sold to non-power sectors.
Why it matters:
This will enable coal companies to sell to other industries, cause them to expand and make them less reliant on a single industry.
Advance Tax on property sales
Currently, a 3-4% advance tax is levied when immovable property is sold. The new proposal would raise this tax by 1.5% for all filers and non-filers.
Objective:
To raise more revenue from real estate transactions and get more individuals to become active tax filers.
Increased Tax on Profit Earned Through Debt
Currently, 15% is deducted as tax on profit made through debt investment (such as bank deposits or bonds). The government proposes to increase this to 20% for individuals and partnerships. For businesses, the tax would still be adjustable.
Project impact:
This would yield Rs. 56 billion and charge the same rate to everyone, leveling the playing field.
Fresh Tax on PIB & T-Bill Trading (Coupon Washing)
A new tax is being imposed on gains arising from sale of government securities—such as Pakistan Investment Bonds (PIBs) and Treasury Bills (T-Bills)—prior to maturity. These are traded primarily through banks, and the capital gains at present go un-taxed.
Reason:
To prevent evasion of taxes and make sure that all such gains are reported in tax returns. This measure is likely to add Rs. 10 billion to the exchequer.
Tax on High-Value Pensions
Pensioners getting above Rs. 10 million a year (and under 70 years old) will be taxed at 5%. There will be a new section in the law requiring tax to be deducted in advance from such pensions.
Objective:
To reduce the unfairness in the tax system by taxing only high-salary pensioners. It could bring Rs. 2 billion to the coffers.
More Tax on Mutual Fund Dividends
Tax rates on mutual fund dividends will be altered by the government. Dividends on debt securities will be taxed at 15% if the fund is invested in debt securities. If it is invested in equities, the dividend will attract a tax of 25%.
Why it matters:
This will be equitable taxation according to the nature of the investment and would yield Rs. 14 billion.
Final Thoughts
These suggested changes are the part of a larger strategy to overhaul Pakistan’s tax system. Through higher compliance and expansion of the tax base, the government is looking to cut back its financial deficit while promoting sustainable growth.
If implemented, these changes will largely determine Pakistan’s economy in the next year.
