Curbs on non-filers; relief for middle-income groups

  ISLAMABAD: The government has proposed several tax relief measures in its budget for fiscal year 2018-19 to facilitate the middle income people in the country. However, several measures were introduced to tighten the noose around non-filers of income tax. Under the relief measures introduced in income tax, threshold of income tax was enhanced from Rs 400,000 to 1,200,000. Tax rates for individuals has been reduced to 15 percent. Five tax slabs introduced for all individuals. Corporate tax will be 29 percent and to be reduced by 1 percent each year up to 2023. Tax on Association of Persons has been reduced to 30 percent. Existing seven slabs of AOPs have been reduced to six slabs. Tax rate on undistributed profit has been reduced to 20 percent. Applicable rate on accounting profit in case of failure to distribute such dividends being reduced from 7.5 percent to 5 percent. Advanced tax on banking transaction of more than Rs 50,000 per day by non-filers has been reduced to 0.4 percent. Withholding tax on issuance of bonus shares has been withdrawn. Limit of tax credit for investment in shares increased from Rs 1.5 million to Rs 2 million. Minimum threshold of payment of tax to preclude recovery of tax during pendancy of first appeal has been reduced from 25 percent to 10 percent of the tax payable. Minimum threshold of tax deduction on goods and services has been enhanced threefold. A 50 percent tax rebate shall be allowed for foreign film makers. A 50 percent tax reduction in income tax liability allowed to companies driving income from film making. Tex rate on the import of coal by manufacturers has been reduced to 4 percent. Advance income tax on credit/debit cards will be charged at 1 percent from filers and 3 percent from non-filers. Withholding tax rates for non-filers has been increased from 12 percent to 14 percent. Withholding tax for non-filers companies increased from 12.5 percent to 15 percent. Minimum tax collection from marriage halls has been fixed at 5 percent of bill or Rs 20,000 per function in major cities, Rs 10,000 per function in remaining cities. Tax on dealers margin of a petrol pump operator be collected on ex-deport sale price of HSD at rate 0.5 percent from filers and 1 percent from non-filers. For promotion of exports, Customs Duty (CD) on raw materials and inputs has been withdrawn. CD on multi-ply and allumunium foil reduced from 20 percent to 18 percent and on finished rooms from 20 percent to 10 percent. Withdrawal of 11 percent CD on acrylic tow announced in the budget. Zero rating on import of potato is being granted retrospectively on 200,000 metric tons imported during period May 5, 2014 to July 31 2014. Reduced rate of sales tax at 5 percent is being introduced on import of 19 times of cinematographic equipment. Withholding tax rates on sale of goods for non-filers are proposed to be increased from existing 7pc to 8pc in the case of a company, and from existing 7.75pc to 9pc in non-corporate cases. Miftah Ismail announced a plan for a gradual retirement of the super tax – currently charged at 4pc to banking companies and 3pc to non-banking companies having income greater than Rs500 million. It will be wound down by 1 percentage point every year, reaching an eventual end for banking companies in three years and in four years for non-banking companies. The super tax had initially been introduced to finance the rehabilitation of internally displaced persons. Similarly, the corporate tax will be reduced by 1pc each year to 25pc by 2023 from the current 30pc, the finance minister said. The tax on undistributed profits will also be decreased from 7.5pc to 5pc; however, it will now apply if at least 20pc of profits are not distributed within six months of the end of the year, compared to 40pc before. Non-filers will also be unable to make any cash deposits to their foreign currency accounts. The FBR will also not question any foreign funds inflow of up to $100,000 per year per person. Ismail also announced a number of measures the government will take if people continue to evade taxes. “New initiatives in data-mining are being initiated to identify individuals who, despite earning taxable income, are not paying their due share in taxes. Government will now monitor potential taxpayers’ financial records and issue notices on evidence of tax evasion,” Ismail warned. Govt can buy back undervalued property within six months of registration. If the budget is approved, the federal government will be able to buy any land or property for double its declared value within six months of the property’s registration. The move is aimed at curbing the practice of undervaluation of the property, mostly relying in the DC rates. The provinces have also been advised by the federal government to abolish DC rates while the federal government will itself abolish the FBR rates on property. Filers will be able to register property after paying a maximum 1pc of the property’s value. Published in Daily Times, April 28th 2018.