ISLAMABAD: Special assistant to the prime minister on revenue Haroon Akhtar Khan has said that withholding tax rates for non-filers of income tax returns would be increased in the next budget.
Speaking at a pre-budget seminar, Akhtar said that the government would not impose any new tax in the budget that will be unveiled on April 27.
Akhtar said that in Pakistan nobody was ready to pay tax and even hospitals, doctors and big business firms were evading taxes. The special assistant defended the tax machinery and said that few FBR officers were corrupt.
He also spoke critically about lowering the tariff rates and signing of free trade agreements. “The free trade agreements have eroded Pakistan’s manufacturing base, which was also the reason behind high imports,” said Akhtar.
He said that in these circumstances Pakistan cannot achieve 7% annual economic growth rate without hitting a high current account deficit.
Akhtar’s comments came in the background of current Free Trade Agreement talks with China under the second phase. Majority of the stakeholders see further trade liberalisation with China as a grave threat to the industrial base.
“Even the multinational companies complain that they cannot compete with goods being imported under various free trade agreements,” said Akhtar.
For the last four years, the tax rates for the people who stay out of the net have been going up. Yet the income tax base remains extremely narrow and this year only 1.26 million people filed income tax returns – 131,000 less than last year.
“We have taxed all possible sources of income and consumption and no further avenue is left to tax,” said former FBR chairman Dr Mohammad Irshad. He said that those who are outside the tax net will not come in the net, irrespective how much cost they have to pay for remaining a non-filer. He said that the increase in tax rates provide more incentives to evade taxes.
The government is finding solace in penalising non-filers of income tax returns. Since the government is targeting Rs4.45 trillion in revenue collection in fiscal year 2018-19, increasing income tax rates for all non-filers of tax returns is one tool in hand to get additional revenues.
However, increasing the tax rates for non-filers would mean that except for 1.261 million individuals and companies that file tax returns the tax burden of everyone who undertakes any transaction or even spends on health and education will increase. There are 72 types of withholding taxes.
The different tax rates for filers and non-filers have become an easy way of revenue generation for the FBR without making efforts. It collects roughly 90% of total revenue through indirect taxes including withholding tax.
