FBR asked to identify low tax impact products
By Our Staff Reporter
ISLAMABAD: The Ministry of Finance (MoF) has tasked the tax body to identify all products with fewer revenue implications for duty withdrawal in the next budget, Dawn has learnt f rom knowledgeable sources.
Amid short revenue collections in the last two and a half months, budget makers are mostly discouraging all those proposals from stakeholders seeking a reduction in tax rates or complete withdrawal since the fiscal deficit is already on an upward trajectory.
A well-placed source in the MoF told Dawn that Finance Adviser Dr Abdul Hafeez Shaikh has asked top of ficials of the Federal Board of Revenue to fine-tune the proposals by Monday.
`We will hold the next meeting on Monday to set a direction of the budget,` the source said, adding major revenue withdrawal is almost impossible.
A series of meetings of budget makers were held after Eid with the last one before the weekend in which it was decided that no new tax will be considered in the next budget, they said. According to the source quoting Shaikh, the government can`t think of imposing a minor tax amid the outbreak of coronavirus in the country.
The adviser asked the FBR to identify all those essential eatables which are subject to customs duty or additional customs duty with lesser revenue implications.
`The government intends to do away with such customs duty on food items,` the source said.
At the same time, he directed the FBR to consider fur-thereasingofprocedures andtaxadonfortheendreconstruction sector chain. People have yet to start taking benefit from the incentives offered through a presidential ordinance last month.
The government believes construction will pick up momentum f rom July onwards.
The finance ministry also asked the FBR budget makers to work out various proposals, in particular giving tax relief to salaried class. The recommendations will be discussed with the adviser in the next meeting.
Various options will be discussed whether to make any cut in the sales tax rate as demanded by various stakeholders. There is one proposal on the table to cut the sales tax rate to nine per cent, from 17pc but it involves billions in revenue loss for the national exchequer.
It is worth mentioning that the finance ministry has already dropped several tax proposals recommended by the FBR. The tax machinery was asked to focus on simplification of tax laws, procedures and removing anomalies in the budget for the next fiscal year.
Shaikh also reminded the FBR that without new tax measures, the government cannot afford to give massive relief in tax rates. `We cannot impose even a Rs2 worth of tax in the coming budget,` he said, adding at the same time they can`t do away with the existing tax measures.
The International Monetary Fund (IMF) has proposed a Rs5.1 trillion revenue collection target for next year. For 2019-20, it has already lowered the FBR`s benchmark to Rs3.9tr, from Rs4.8tr to mitigate the impact of the pandemic. However, achieving this benchmark also depends on the continuation of economic activity during June.