Govt mulls options to reduce withholding taxes in budget

• Proposal regarding increasing tax rates is also under consideration.
• Stabilising Rs30 rupee-dollar difference by taxes will harm economy.
• Registration CNICs for trades exceeding Rs50,000 proposed.

ISLAMABAD: Ishaq Dar-led Ministry of Finance is mulling options to reduce withholding taxes in the upcoming federal budget for the fiscal year 2023-24, The News reported Tuesday.

Moreover, in order to meet the Rs9,200 billion Federal Board of Revenue's (FBR) target set by the International Monetary Fund (IMF), a proposal regarding increasing tax rates is also under consideration for the upcoming budget — expected to be unveiled on June 9. 

It should be noted that the economy is already facing significant challenges, and the Rs30 disparity between rupee and dollar rates in the interbank and open market exacerbates the situation. 

The use of informal channels such as hundi or hawala over banks has led to a decrease in remittances.

In an exclusive discussion, FBR former member Shahid Husain Asad explained that the government implemented import restrictions to manage the balance of payments, which have had adverse effects on manufacturing and trade.

He highlighted that if the country’s economy fails to grow, tax receipts will decrease as taxes are closely tied to economic performance. He warned that neutralising the Rs30 difference in the dollar rate by increasing taxes could further harm the economy.

The people are already experiencing financial difficulties, and with the upcoming elections in 2023, increasing tax rates would not be favourable for the government.

A proposal has also been put forth to reinstate the requirement of registering CNICs (Computerised National Identity Cards) for trades exceeding Rs50,000.

It is suggested that trade conducted with a CNIC should be reported to the FBR through online channels. Based on a person’s sales and purchase records, the department should generate a preliminary tax return, assess the individual’s annual income, and levy taxes accordingly. 

If an individual wants to make amendments to the draft return, they can submit the revised version to the FBR.

Asad further added that another point under consideration in the budget proposals is the current number of filers, which has reached three million. However, individuals typically become filers only when they intend to purchase properties and vehicles worth millions of rupees.

Another proposal being considered is that if a person, after becoming a filer, acquires a property or a vehicle valued at over Rs10 million, their tax case should undergo a thorough audit and scrutiny.