Tag: Revenue collection

  • Govt collects Rs75 billion from consumers in one month through petroleum levy

    The Pakistani government collected a significant sum of Rs75 billion in revenue from the petroleum levy (PL) in July 2023. This levy is a crucial income source because it’s not part of the divisible pool. The increase in the petrol levy to Rs55 per litre has driven this boost in revenue.

    If this pattern continues for the remaining 11 months of the fiscal year, the government could surpass its ambitious budget target for the petroleum levy. The target of Rs869 billion might be exceeded by a notable Rs31 billion.

    In July, the first month of the fiscal year, petroleum consumption decreased by 6 per cent compared to the same month in the previous fiscal year. However, when we look at the month-to-month basis, petroleum product consumption remained constant in July 2023 compared to the previous month.

    An anonymous source from the Petroleum Division, speaking to Brecorder, expressed the government’s concern about the potential decline in consumption. Such a decline could jeopardise meeting the budget goals. However, the government has a plan in place. If needed, the petroleum levy could be increased to Rs60 per litre, which is the maximum limit according to an agreement with the IMF under the Stand-By Arrangement (SBA) and the Finance Act 2023–24.

    Predictions for the current month point to a collection of Rs70 billion from the petroleum levy due to recent price increases of Rs17.50 per litre for petrol and Rs20 per litre for high-speed diesel (HSD).

    The government has committed, under the ongoing IMF SBA, to gradually raising the levy rate to an average of Rs55 per litre over the fiscal year. This strategic move is estimated to bring in an additional Rs79 billion. Currently, the government enforces a petroleum levy of Rs55 per litre on petrol and Rs50 per litre on HSD.

    Keep in mind that any rise in the petroleum levy on fuel products could lead to inflation, increasing transportation costs for goods and people as well as input expenses for various sectors.

    Oil industry experts speculate that gasoline prices might increase further by the end of the month. This projected increase is mainly due to the ongoing depreciation of the Pakistani rupee against the US dollar, which is likely to reduce gasoline consumption.

    In the last fiscal year, the government collected Rs580 billion from the petroleum levy, falling short of the Rs855 billion target by Rs275 billion.

    During the first quarter of the fiscal year 2022–23 (July–September 2022), the collection of the petroleum levy was Rs47.476 billion. This lower amount was due to the lower levy rates of Rs10 on petrol and Rs5 on HSD. Subsequently, collections increased significantly to Rs177.805 billion in the first two quarters (July–December) and further to Rs362.480 billion in the first three quarters (July–March 2023) of the previous fiscal year.

    It’s noteworthy that total consumption of petroleum products dropped by 27 per cent year-on-year in the fiscal year ending on June 30, 2023. Consumption decreased from 22.6 million metric tonnes in the fiscal year 2021–22 to 16.61 million metric tonnes in 2022–23 (July–June).

  • Pakistan’s inflation forecasted to remain between 25-27% for July, says Finance Ministry

    Pakistan’s inflation forecasted to remain between 25-27% for July, says Finance Ministry

    The Ministry of Finance anticipates a decline in inflation for the month of July compared to the previous month, with expectations of it remaining within the range of 25-27 per cent. The ministry’s ‘Monthly Economic Update & Outlook’ for July attributes this anticipated decrease to the recent reduction in administered prices of petrol and diesel, which is expected to lower domestic prices of essential goods by impacting transportation costs.

    The headline inflation in Pakistan slowed to 29.4 per cent in June, marking the lowest reading since January. The report explains that the recent decline in international commodity prices is likely to counteract the inflationary pressures caused by domestic supply shocks. Notably, the benchmark index of international food commodity prices experienced a downturn in June 2023, primarily driven by price decreases in major cereals and various vegetable oils.

    The government’s timely efforts to boost the agriculture sector through the Kisan Package are expected to result in a better crop outlook and smoother domestic supplies. Additionally, anticipated political stability and a stable exchange rate are deemed as factors that would contribute to achieving price stability.

    Regarding the fiscal outlook, the Ministry of Finance expects both exports and imports to gradually increase in the upcoming months of FY2024. Despite other factors, the report projects that the current account deficit will remain sustainable during this period.

    To enhance revenue collection in FY2024, the government has unveiled a comprehensive strategy for all sectors of the economy, aiming to revive economic growth and foster a higher inclusive and sustainable growth trajectory. Various administrative and policy measures have been introduced to increase tax collection, while the State Bank of Pakistan’s withdrawal of import restrictions is expected to stimulate demand and support revenue improvement.

    The report acknowledges the success of the government in ensuring the sustainability of the external and fiscal sectors during FY2023, achieved through the implementation of tough decisions and stabilisation measures. Looking ahead to FY2024, the government aims to achieve higher economic growth of 3.5 per cent through measures such as the Kisan package, industrial support, export promotion, encouragement of the IT sector, and resource mobilisation.

    In conclusion, the Ministry of Finance emphasises that prudent and effective economic decisions, political and economic certainty, and the continuation of friendly economic policies, along with sufficient foreign exchange financing, will be crucial to attaining higher and sustainable economic growth. The recent approval of the Stand-By Arrangement by the International Monetary Fund and other bilateral and multilateral inflows are expected to further improve the macroeconomic environment and enhance the confidence of economic agents.

  • FBR to increase property valuation rates by 13-15% in accordance with World Bank loan conditions

    FBR to increase property valuation rates by 13-15% in accordance with World Bank loan conditions

    In accordance with the loan conditions set by the World Bank, the Federal Board of Revenue (FBR) has made the decision to increase property valuation rates in various urban centers across the country. This increase will range from 13 per cent to 15 per cent on average.

    As part of this ongoing exercise, the FBR has also expanded the number of cities covered from 42 to 51. The revised property valuation rates will be officially announced for these cities.

    High-ranking sources within the FBR have confirmed that consultations with provincial authorities are underway to determine the adjusted property valuation rates, which are scheduled to take effect from August 1, 2023.

    Presently, the FBR’s property valuation rates are applicable in over 40 cities and towns, including Abbottabad, Attock, Bahawalnagar, Bahawalpur, Chakwal, Dera Ismail Khan, Dera Ghazi Khan, Faisalabad, Ghotki, Gujranwala, Gujrat, Gwadar, Hafizabad, Haripur, Hyderabad, Islamabad, Jhang, Jhelum, Karachi, Kasur, Khushab, Lahore, Larkana, Lasbela, Lodhran, Mandi Bahauddin, Mansehra, Mardan, Mirpurkhas, Multan, Nankana Sahib, Narowal, Peshawar, Quetta, Rahimyar Khan, Rawalpindi, Sahiwal, Sargodha, Sheikhupura, Sialkot, Sukkur, and Toba Tek Singh.

    Under the revised valuation tables, all of these cities will experience an increase of 13 per cent to 15 per cent. Additionally, starting from August 1, 2023, nine more cities and towns will be added to the list of covered areas.

    The Punjab Board of Revenue recently communicated to all deputy commissioners and district collectors, informing them of a meeting held under the chairmanship of a senior member of the Board of Revenue, Punjab. The purpose of the meeting was to discuss the progress in preparing the DC Valuation Tables in consultation with FBR representatives.

    During the meeting, the senior member requested that instructions be issued to all Punjab district collectors regarding the preparation of valuation tables for the fiscal year 2023-24.

    To ensure consistency and alignment between the DC valuation tables and the FBR valuation tables, district collectors have been advised to include FBR representatives as members of the committee, as previously stipulated in the Punjab Stamp (Valuation Tables in respect of Immovable Property) Rules of 1999.

    It is recommended that the specified timelines for completing the valuation tables be adhered to. Furthermore, the valuation tables should include the name of the housing society or scheme, as well as the Khasra numbers corresponding to the developed housing society or scheme.

    In determining the rates, consideration should also be given to the brochure value advertised by the housing societies or schemes. This task should be given top priority, as per the order.

    The FBR’s higher authorities are currently reviewing the work conducted by field formations in consultation with the respective provincial authorities.

    According to Geo, the upcoming exercise will result in an average increase of 15 per cent in the valuation tables, effective from August 1, 2023. The aim is to establish the updating of valuation tables as an annual practice, as there is still a disparity between the FBR’s notified rates and the current market rates.

    The revision of property valuation tables is a condition attached to the $400 million World Bank loan known as the ‘Pakistan Raises Revenues (PRR) and RISE-II program’. The adjusted valuation rates will contribute to increased tax collection from immovable properties. However, it is important to note that the FBR’s notified rates still remain lower than the prevailing fair market value.

  • Elimination, reduction of withholding taxes in budget 22-23

    On June 10, 2022, Pakistan will present its federal budget for 2022-2023. A number of new taxes measures are expected to be announced in the budget to raise additional income.

    It has been learned that a number of withholding taxes would be removed or lowered in the coming budget.

    The Federal Board of Revenue (FBR) will choose those withholding taxes that have lower revenue implications without jeopardising the goal of documenting as part of the budget planning process.

    According to Brecorder, to document future withholding transactions, a new Directorate-General for Synchronized Withholding Agents System would be developed.

    Withholding taxes cause inconsistencies will be reduced by the FBR, as all withholding taxes will be examined to see whether there are any distortions produced by income tax withholding, and adjustments will be made to correct them.

    This will be accomplished by making modifications to guarantee that all withholding tax received is either claimed or reimbursed in the return filed in response to the tax demand.

    Elimination of Taxes in budget 21-22

    The government had eliminated multiple withholding taxes, including the tax on royalty payments to residents during budget 21-22 such as cash withdrawals, banking tools, money transfers other than cash, tax collection from persons remitting funds abroad via credit, debit, or prepaid cards, tax collection on domestic and international air travel, mineral extraction, tax collection by a stock exchange registered in Pakistan, tax collection on marginal financing by NCCPL, CNG stations, and tax collection on certain petroleum products.

    Income Tax Ordinance

    The Income Tax Ordinance of 2001 contained 38 withholding tax measures. This large number of requirements adds to the complexity and places an excessive strain on different withholding agents to comply. It also has an impact on a country’s ease of doing business rating. In the last budget, 12 withholding taxes were eliminated in an effort to improve company ease and simplify tax rules.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) advocated that the withholding tax (WHT) structure be overhauled and reduced from its current twenty-six rates to just five for filers.

    Only inactive taxpayers should be subject to this tax. Alternatively, the 8% WHT rate on services is a minimum tax that applies regardless of the service provider’s actual taxable revenue. This tax effectively becomes an indirect tax, raising the cost of doing business for service providers; as a result, service tax should be flexible.

    Withholding Tax Regime

    The Withholding Tax Regime (WHT) is a worldwide phenomena, and it is the primary source of federal revenue received at the national level in Pakistan. The collection of withholding taxes, as well as the reliance on them, has increased throughout time. Various Withholding Taxes, which are distinguished by their adjustable and presumptive nature, collected Rs422(b) out of total Direct Taxes collection of Rs740(b) for the financial year 2012, accounting for 57 per cent of total Direct Taxes collection.

    Since the imposition of direct taxes by governments and taxpayers on two counts, the withholding tax regime has been a feature of the tax system in some form or another:

    1. The government receives revenue on a consistent basis throughout the year to fund its expenditures and operations.
    2. Provides taxpayers with the opportunity to pay down their debts in affordable installments.

    Many countries have been obliged to change their economies in recent years as a result of globalisation, in order to unify tax laws and align them with new trade and investment policies represented in free trade agreements. “Hang Together” is more relevant today than it has ever been. Neither countries’ borders nor their economies can be closed. Tax policies are also inextricably linked to foreign economies.

    Due to the requirement for an entity to oversee and manage the Withholding Tax Regime in such a competitive climate, the Directorate General of Withholding Taxes was established by the Finance Act of 2008 under section 230A of the Income Tax Ordinance 2001.

  • PTI’s Pakistan: ‘Govt to achieve Rs4,960 billion revenue target’

    PTI’s Pakistan: ‘Govt to achieve Rs4,960 billion revenue target’

    Federal Minister for Industries and Production Hammad Azhar has said that the government is confident of achieving the tax collection target of Rs4,960 billion set in the 2020-21 federal budget through Federal Board Revenue (FBR).

    Concluding discussion on the Finance Bill 2020-21 in the National Assembly, the minister on the floor of the House pointed out that the present government inherited a weak economy, but due to its concerted efforts, the government succeeded in stabilising it.

    He said that all the international financial institutions are praising Pakistan government’s performance on economic front.

    Hammad said that presenting a tax free budget while enhancing allocations for development shows the true leadership of Prime Minister Imran Khan. He said the government is trying to minimize the impact of Covid-19 on the economy by pursuing a prudent strategy.

    The minister categorically stated that the federal government has not withheld any funds of the provinces under the National Finance Commission (NFC). He said that the recommendations of the Senate for the Finance Bill 2020-21 would be given due consideration.

    Earlier, the National Assembly approved 96 demands for grants pertaining to different ministries, divisions and departments for the next fiscal year.

    Presented by Minister for Industries and Production Hammad Azhar, these demands were related to Climate Change, Commerce Division, Communications Division, Pakistan Post, Defense Division, Survey of Pakistan, Economic Affairs Division, Power Division, Petroleum Division,  Geological Survey of Pakistan, Foreign Affairs Division, Housing and Works Division, Human Rights Division, Information and Broadcasting Division, Information Technology and Telecommunication, Inter Provincial Coordination,  Kashmir Affairs and Gilgit-Baltistan Division,  Law and Justice Division, Federal Shariat Court, Council of Islamic Ideology, National Accountability Bureau, District Judiciary Islamabad Capital Territory, Maritime Affairs, Narcotics Control, National Assembly, The Senate, Overseas Pakistanis and Human Resource Development Division, Parliamentary Affairs Division, Planning Development and Special Initiatives Division, CPEC Authority, Privatization Division, Religious Affairs and Inter Faith Harmony Division, Science and Technology Division, States and Frontier Regions and Water Resources.

    No cut motions were moved on these demands for grants.