ISLAMABAD: The Federal Board of Revenue (FBR), Wednesday, informed the Senate Standing Committee on Finance that no tax policy proposal is under consideration to change the current exemption threshold of salaried individuals.
The Senate Standing Committee on Finance has asked the FBR and the Finance Ministry to explain what has been done to increase the tax net other than burdening the existing taxpayers.
The Senate Standing Committee on Finance presided over by the Senate Saleem Mandviwala has taken up on Wednesday agenda item of briefing from the FBR chairman on reported news that the World Bank has urged Pakistan to eliminate tax exemptions.
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The FBR officials informed that with regards to the exemption threshold of both salaries and business individuals, which are present is Rs600,000 per annum, either any policy proposal is under consideration by the FBR to change this current exemption threshold limit, nor the World Bank as recommended to the FBR to lower this threshold limit for this class of persons.
As the discussion on the agenda items began, the senators, Farooq H Naek and others questioned hat was being done to bring retailers and services sectors into the tax net as 75 per cent tax is being aid by 13 per cent Pakistanis.
The FBR chairman acknowledged that 75 per cent tax is being paid by 13 per cent but stated that the WB has talked about agriculture tax, which does not come under the FBR purview as it is a provincial subject.
The Senate Committee while deliberating on the reported news regarding “World Bank urges Pakistan to eliminate tax exemptions” was apprised that the news article has been examined in detail that the World Bank has proposed taxation of real estate and agricultural sector. However, it was informed by the FBR that no formal communication in this regard has been made by the donor agency.
The FBR further apprised that tax on agriculture income is charged and collected by the provincial governments and the federal government cannot impose tax on agriculture income. It was further added that with regards to exemption threshold for both salaried and business individuals which at present is Rs 600,000 per annum.
It was apprised that neither any policy proposal is under consideration by the FBR to change this current exemption threshold limit, nor the World Bank has recommended to the FBR to lower this threshold limit for this class of persons.
The FBR chairman debated that provinces are failing to impose taxes on the agricultural sector. Five per cent, 10 per cent, and 15 per cent tax is imposed on the income of the agricultural sector, and there is zero tax on 4 lakh rupees of agricultural income and one per cent tax on 8 lakh rupees tax income.
He further informed that the number of taxpayers has reached 4.9 million. He said that in Pakistan, the tax cannot be applied on the low income which is 65 per cent of the population. He said that the tax gap can be bridged if 15 million people start paying tax.
The committee sought from the FBR a detailed briefing on taxpayers, and its applicability and revenue generated through the tax.
Senator Naek remarked how long the country would be borrowing to finance its expenditure due to a dismally low tax-to-GDP ratio.
The committee has decided to take a detailed briefing from the FBR on the number of taxpayers, as well as, on the share of direct and indirect taxes in total tax collection and how much revenue loss the country was suffering due to the smuggling of goods.
On the agenda item of Rs5billion fraud from the account holders of a private bank, the governor State Bank of Pakistan (SBP), Jamil Ahmed informed the committee that after an investigation by the regulator, FIR has been lodged against the officials of the bank. Additionally, he said that it was not a widespread fraud rather it was of one family and the total amount of Rs254 million was repaid to the affected family.
The representative of the affected family testified before the committee that Rs270 million had been credited to the account of the family on October 12, 2023, only after the committee had taken up the matter. However, senators were unanimous that the SBP should take action against the officials involved in the fraud for the sake of the credibility of the banking system.
Senators Musaddik Malik, Mohsin Aziz, Farooq H Naek, Kamil Ali Agha, and others said that the banking sector’s credibility was affected by this act and there is a need that the SBP should take appropriate action against the involved bank officials.
The SBP has played a role regarding the refund, said Jamil Ahmed.
On the agenda item of the difference of US$8 billion in import-export, the committee was informed that the investigation is being done and one week’s time was sought to come up with the report on the issue.
The committee was informed that efforts are under way to exchange import-export data with China, and similar trade gaps exist in other member countries, as well.
Before this, on the case of a big fraud in import of solar panels, the FBR chairman said that investigation of this matter is under way. He sought a week’s time for the report.
The FBR chairman said that there is a gap of $3-4 billion in trade volume with China. The member FBR informed the committee that Pakistan’s trade with China is 23 per cent. On the issue of fake currency notes, the SBP governor said that the security features of the notes are being reviewed.
This will help prevent fake currency notes, he added. He said that a proposal was being weighed to introduce polymer currency notes in the future because these are not only secure but their life duration is long. He said that Pakistan does not have the capacity and got them printed polymer notes from abroad. The committee also suggested to the FBR on auctioning non-custom paid vehicles seized across the country.
The committee also discussed fake currency notes which are circulating in the market. The chairman committee said that most fake currency notes are of Rs1,000 denominations, and said that fake currency notes are also coming out of ATM machines.
The committee suggested the introduction of plastic currency to discourage fake currency notes. The meeting was attended by senators Kamil Ali Agha, Musadik Malik, Zeeshan Khanzada, Sherry Rehman, Mohsin Aziz, and Farooq H Naek. Officials from the ministry and other related departments were also in attendance.
Copyright Business Recorder, 2023
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