Tag: tax relief

  • Govt made significant efforts to protect salaried class from taxes: Finance Minister

    Govt made significant efforts to protect salaried class from taxes: Finance Minister

    Federal Minister for Finance and Revenue Muhammad Aurangzeb has stated that the government will review measures to protect the salaried class following the increased tax burden introduced in the Budget 2024-25.

    Aurangzeb said that the government tried to “ring-fence the salaried class as much as it could.” He acknowledged the impact of the new tax measures on this group, highlighting his six years of experience in understanding the nuances of tax brackets, super tax, and capital value tax (CVT).

    “We made significant efforts to protect them,” Aurangzeb said, emphasising that individuals earning less than Rs600,000 annually remain exempt from income tax.

    He added that the highest tax bracket of 35 per cent was also shielded from additional taxes to prevent talent from leaving the country.

    Aurangzeb mentioned ongoing reviews to assess potential relief for the tax slabs, aiming to balance the need to increase tax revenue from Rs9.4 trillion to Rs12.9 trillion with the burden on the salaried class.

    “We will generate Rs1.5 trillion through additional revenue measures by removing exemptions and imposing more taxes,” he noted, revealing that the overall impact of these measures on the salaried class is approximately Rs70 billion out of the Rs1.5-1.6 trillion in new taxes.

    The Finance Minister’s comments come after the government’s decision to increase tax liability for individuals earning more than Rs50,000 monthly in the Budget 2024-25.

    The Finance Bill 2024 indicates that the highest impact will be on those earning Rs6 million annually (Rs500,000 monthly), with a tax liability increase of Rs22,500. Interestingly, those earning Rs12 million annually (Rs1 million monthly) will face the same increase.

    On Friday, lawmakers, including those from allied political parties, criticised the government for imposing additional taxes on the salaried class while providing subsidies and exemptions to the real estate and agriculture sectors.

    During the budget debate in the National Assembly, they argued that the heavy taxation on the salaried class is irrational and could exacerbate brain drain. They called for substantial revisions to the federal budget to offer more relief to the masses and extend the tax net to previously exempt sectors.

    The salaried class in Pakistan has seen a significant increase in tax burden over recent years as the government targets what many consider “soft targets” in its efforts to boost the tax-to-GDP ratio.

    The government has faced criticism for focusing on formal sectors and not adequately addressing the informal economy.

  • Budget 2023-24: Finance Minister announces tax relief measures for IT sector and freelancers

    Budget 2023-24: Finance Minister announces tax relief measures for IT sector and freelancers

    In a recent announcement, the federal government has unveiled a series of measures aimed at fostering growth and investment in the freelancing and information technology (IT) sectors. The government has decided to implement a reduction in tax rates for investments in the IT sector, provide tax breaks to freelancers, and establish a favorable environment for investment by normalizing duty-free equipment provisions.

    During the budget presentation for the fiscal year 2023-24, Finance Minister Ishaq Dar highlighted the importance of the IT sector and its immense talent pool within the country. To support the growth of IT exports, the government plans to extend the current 0.25 per cent discounted income tax rate for the next three years.

    Recognizing the significance of banks in facilitating investment in the IT sector, the finance minister proposed a reduced tax rate of 20 per cent for banks involved in lending to this sector. This reduction aims to alleviate the burden on banks, as the existing tax rate for investments stands at 39 per cent.

    Additionally, the government has recommended providing Duty-Free Equipment privileges to incentivize investment in the IT sector. Moreover, the minister has suggested granting the industry the status of Small and Medium Enterprises (SMEs), enabling individuals to avail themselves of special and exclusive discounted income tax rates applicable to this sector.

    In a move to streamline processes for IT and IT-related services exporters, Minister Dar proposed the issuance of Automated Exemption Certificates to non-residents within 30 days. Furthermore, the government plans to reduce the Goods and Services Tax (GST) from 15 per cent to 5 per cent specifically for IT and ITeS services in the Islamabad Capital Territory (ICT).

    To support the freelancing community, Minister Dar recommended exempting individuals from the obligation of filing a sales tax return in order to benefit from the concessional rate of 0.25 per cent. Emphasizing the vital contribution of freelancers to the country’s foreign exchange earnings, the minister suggested that those whose IT and IT-enabled services exports were less than $24,000 in the previous fiscal year should be exempted from sales tax registration and allowed to file a simplified single-page income tax return.

    These measures underscore the government’s commitment to fostering a conducive business environment and encouraging investment in the freelancing and IT sectors, thereby facilitating economic growth and job creation.