Sources told Business Recorder here on Thursday that the direct taxes measures could be to the tune of Rs 125 billion to be taken in budget (2014-15). After finalisation of budgetary measures, the exact figures of revenue impact would be worked out for 2014-15. The remaining amount would come through withdrawal of statutory regulatory orders (SROs) and measures of customs duty, sales tax and federal excise duty.
The federal budget would focus on taxation of people on the basis of their expenditures and doubling of withholding tax rates for the non-compliant taxpayers as compared to no change of rates for existing taxpayers. Prime Minister Nawaz Sharif has categorically conveyed to the budget makers for not proposing any budgetary measure which has direct impact on the general masses. It has been further directed for not taking any taxation measure which would increase the incidence of taxes on common people.
The FBR plans to check expenditures of the potential persons through various measures and double withholding taxes for non-filers from next fiscal year. As far as expenditure on foreign air travel is concerned, it is a heavy expenditure on international air travel.
It has been proposed to impose 10 percent adjustable withholding tax only on international passengers travelling through club, business and first class. The rate would not be enhanced for economy class. The value of foreign air travel is around Rs 60 billion on annual basis in Pakistan. On the basis of this huge amount spend on tickets of international air travel, the revenue measure is expected to generate Rs 6 billion in 2014-15.
At present 5 percent adjustable withholding tax is already applicable on domestic air tickets. At the same time, the FBR has also proposed enhancement in the rates of the Federal Excise Duty (FED) on international air travel in budget (2014-15) by revising the fixed FED rates on tickets issued to passengers travelling aboard.
Under the proposal, 5 percent adjustable withholding tax would be applicable on the passengers filing their annual income tax returns. On the other hand, 10 percent withholding tax would be imposed on passengers not filing their returns. The rate of withholding tax would be double for the foreign travellers who are non-compliant taxpayers. The passengers can claim adjustment of the paid amount in the form of withholding tax by filing their income tax returns.
People are travelling to USA, Europe and other countries with their families and not ready to file their income tax returns. The imposition of the 10 percent adjustable withholding tax on the passengers travelling aboard using club, business and first class would ensure compliance or pay heavy taxes like 10 percent withholding tax. Sources said that once the new law has been passed under the Finance Bill (2014-15), the concerned authorities would approach the airlines for placing mechanism for differentiating between the filers and non-filers for charging 5 and 10 percent adjustable withholding tax.
According to sources, the government is trying to enhance withholding tax rates from 6 to 10 percent on services provided by professionals. For example the exiting rates would be considerably enhanced from 6 to 10 percent on services provided by doctors and other medical practitioners.
The services under section 153(1) (b) of the Income Tax Ordinance 2001 attract tax deduction of 6 percent. The said rate has been proposed to be enhanced from existing 6 percent to 10 percent in coming budget. Under section 153, the services include the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee.
The federal tax authorities intended to voluntarily surrender its powers on issuance of SROs to the Parliament. It has yet to be decided whether the powers be surrendered to the Parliament in budget (2014-15). Prime Minister Nawaz Sharif has convened another crucial meeting on Friday (May 30) in order to take decision on withdrawal of hundreds of Statutory Regulatory Orders (SROs) as well as surrendering of issuing power to the Parliament from the next budget.