- A recently introduced bill may pose major challenges to meeting revenue goals.
- The government could achieve a “breakthrough” in ongoing negotiations with the banks within a few days.
- The government has so far ruled out the possibility of any mini-budget in FY25.
Finance Minister Mohammad Aurangzeb recently presented the Tax Laws Amendment Bill, 2024, in Parliament, proposing the elimination of the non-filers category for certain sectors. However, this move could pose significant problems in achieving higher revenue collection at exorbitant rates, News reported Tuesday.
Top officials revealed that the Federal Board of Revenue (FBR) had increased tax rates for non-filers from 200% to 300% in Budget 2024-25, but abolition of this category for sectors specific measures could harm revenue generation.
Amid a severe revenue shortfall, which is also expected to occur this month, the government may achieve a “breakthrough” in the ongoing negotiations between the committee headed by Deputy Prime Minister Ishaq Dar and the banks in the coming days, which would result in paying an increased amount of taxes on banks. sector during the current month.
This breakthrough may reduce the revenue deficit to the tune of Rs 50 billion in December, otherwise the revenue deficit may approach Rs 490-500 billion in the first half. However, with the approval of the Tax Laws Amendment Bill 2024 by Parliament, it has been proposed to abandon the existing practice of collecting an increased tax rate from non-filers, so that in the short term Ultimately, revenue collection could suffer losses.
Although the FBR has proposed strict measures against non-filers, both in income tax and sales tax, including ban on purchasing property, new cars above 800 cc and to invest in securities and mutual funds etc., he should follow the law to create a tax demand. This legal route would take several months at a time when the FBR is required to collect taxes on a daily, weekly and monthly basis to meet the target of Rs 12.97 trillion.
Currently, the number of sales tax (ST) registrations stands at 367,000 in the current financial year compared to 337,000 until the end of June 2024. The number of ST registrations has increased by almost 40,000. In the medium to long term, the proposed tax laws could help the FBR introduce a culture of tax compliance, but they may not solve the current problem of revenue shortfall.
The exact amount of the deficit would be known after December 25, as corporate sector returns are expected until December 31. The FBR would therefore continue its efforts to maximize collection, but the revenue deficit would exceed at least Rs 340 billion, adding another deficit of Rs 100 billion. .
The government has so far ruled out the possibility of any mini-budget in the current fiscal year, but it will have to do something before the International Monetary Fund (IMF) review mission visits Islamabad in mid-February 2025.
When this correspondent contacted senior FBR officials, they said there was a proposal to abolish the non-filers category for certain areas through the Tax Laws Amendment Bill 2024 and admitted that this could result in loss of income. The revenue collector should take drastic steps on reforms, they added.
Responding to another question, a senior official said the Dar-led committee was scheduled to hold a meeting on Tuesday (today), but he could not predict anything about its outcome at this stage.