Tag: taxation

  • Salaried class fights back: Petition filed against high taxes in Supreme Court

    Salaried class fights back: Petition filed against high taxes in Supreme Court

    After the National Assembly approved the controversial economic budget for the next fiscal year last week, a group called the Salaried Class Alliance of Pakistan has filed a petition in the Supreme Court of Pakistan, citing discrimination in taxation against salaried classes in the recent budget.

    “This budget marks the third consecutive year in which the burden of taxation has disproportionately fallen upon the salaried class, neglecting broader efforts to expand the tax base in the country,” read the petition.

    The alliance raised key issues such as an unbalanced tax burden, neglect of tax base expansion, impact on economic growth and brain drain, and disparities in taxation.

    It urged the Supreme Court, “Under Article 184(3) of the constitution of Pakistan to uphold justice and protect the rights of salaried class and all taxpayers in Pakistan.”

  • Telecom companies block 9,000 SIMs of non-filers under FBR directive

    Telecom companies block 9,000 SIMs of non-filers under FBR directive

    Telecom operators have taken action by blocking the mobile SIMs of approximately 9,000 individuals who have not filed their taxes, following directives from the Federal Board of Revenue (FBR).

    According to a spokesperson from the FBR, this measure has been expedited, with telecom companies receiving updated data daily for the purpose of blocking SIMs.

    It has been revealed that the FBR has already provided data for around 30,000 individuals whose SIMs are earmarked for blocking.

    However, the spokesperson acknowledged that there is still a substantial number of approximately 506,671 individuals who have not filed their Income Tax Return for Tax Year 2023 but are obligated to do so.

    Initially, telecom operators were hesitant to execute this directive, citing various legal concerns. Nevertheless, they eventually consented to manually block SIMs in smaller batches.

    The FBR had issued an Income Tax General Order (ITGO) in late April, instructing the disabling of mobile phone SIMs belonging to over half a million individuals not appearing on the active taxpayer list.

    At the time of issuance, telecom companies were directed to furnish a compliance report by May 15 regarding this matter.

  • IMF urges Pakistan to expand capital gains tax scope to include cryptocurrencies

    IMF urges Pakistan to expand capital gains tax scope to include cryptocurrencies

    The International Monetary Fund (IMF) has advised the Federal Board of Revenue (FBR) to broaden the scope of capital gains tax (CGT) by incorporating cryptocurrencies into the tax regime.

    This recommendation arises amidst ongoing discussions between the Fund and Pakistani authorities regarding the $3 billion stand-by arrangement (SBA).

    The four-day review, which commenced on Thursday, aims to unlock the final tranche of approximately $1.1 billion secured by Islamabad under a last-minute rescue package last summer, thus averting a sovereign debt default.

    During these deliberations, the IMF proposed a reassessment of tax slabs for real estate and listed securities to ensure comprehensive taxation of all gains, irrespective of asset holding periods.

    Moreover, the IMF urged the FBR to mandate property developers to monitor and report all pre-completion property transfers, with penalties for non-compliance. This move aims to bring under the tax umbrella the prevalent practice of trading property plot files within housing schemes.

    These recommendations are anticipated to be incorporated into the forthcoming bailout package under the Extended Fund Facility (EFF), potentially becoming integral to the FY2024–25 budget through the finance bill.

    The IMF’s technical assistance report highlights the challenges faced by Pakistani authorities in assessing and collecting taxes on capital gains from real estate transactions, particularly those occurring before formal property registration.

    To address this issue, the IMF suggests obligating property developers to track and report all pre-completion property transfers, with penalties for non-compliance, thereby shifting tax liabilities to developers if they are not recoverable from the initial transferor.

    Furthermore, the IMF advocates for the expansion of assets subject to capital gains tax to include emerging investment avenues such as cryptocurrencies alongside real estate and listed securities. 

    It also proposes revising tax slabs to ensure equitable taxation of capital gains, irrespective of asset holding durations.

    Overall, these IMF recommendations seek to fortify the taxation framework, ensuring a more inclusive and equitable approach to capital gains taxation in Pakistan.

  • Toyota Yaris prices reduced by up to Rs133,000

    Toyota Yaris prices reduced by up to Rs133,000

    Indus Motor Company, the manufacturer of Toyota vehicles in Pakistan, has announced a significant price adjustment for its Yaris sedan range.

    This adjustment, effective from Thursday, reflects a reduction in prices ranging from Rs73,000 to Rs133,000.

    The revised pricing structure for the Yaris lineup is as follows: the 1.3 MT LO, 1.3 CVT LO, and 1.3 MT Hi variants will now be priced at Rs4.326 million, Rs4.616 million, and Rs4.586 million, respectively, representing a reduction of Rs73,000 for each model.

    Additionally, the price of the Yaris CVT Hi has been lowered by Rs133,000 and is now priced at Rs4.766 million.

    According to Business Recorder, this decision comes in response to the recent imposition of a 25 per cent sales tax on vehicles priced above Rs4 million.

    By implementing these price cuts, Indus Motor Company aims to ensure that the Yaris remains within the 18 per cent sales tax bracket.

    Initially, the government’s decision to raise the sales tax was targeted at vehicles with engine sizes of 1,400 cc and above, as well as those priced above Rs4 million.

    However, it later extended to include SUVs below the 1,400cc threshold, prompting manufacturers to advocate for a Rs4 million price cap.

    As a consequence of this tax adjustment, certain models from Toyota, Honda, and Suzuki are now subject to the increased sales tax regime.

  • Daraz Group plans layoffs amid market challenges

    Daraz Group plans layoffs amid market challenges

    In an internal communication obtained by Reuters on Tuesday, Alibaba-owned e-commerce platform Daraz Group revealed its decision to implement layoffs across the company.

    Acting CEO James Dong stated that the move aims to “adopt a more streamlined and agile structure” to address challenges faced by the company in the market.

    While the memo did not specify the exact number of individuals affected by the layoffs, it acknowledged the necessity of saying farewell to numerous valued members of the Daraz family.

    The company, operating in Pakistan, Bangladesh, Nepal, Sri Lanka, and Myanmar, declined to provide details on the percentage or absolute number of employees impacted.

    Last year, Daraz employed 3,000 individuals globally. However, the company had to reduce its workforce by 11% due to various challenges, including difficult market conditions, the Ukraine crisis, supply chain disruptions, inflation, higher taxes, and reduced government subsidies.

    James Dong emphasised the group’s commitment to addressing the market’s unprecedented challenges and stated, “Despite our efforts to explore different solutions, our cost structure continues to fall short of our financial targets. Facing unprecedented challenges in the market, we must take swift action to ensure our company’s long-term sustainability and continued growth.”

    Dong outlined the group’s strategy moving forward, highlighting a focus on improving the consumer experience.

    This involves diversifying the offerings of value-for-money products, expanding product categories, and enhancing the operational efficiency of sellers on the Daraz platform.

    The company, founded in Pakistan in 2012 as an online fashion retailer, was acquired by Chinese internet giant Alibaba in 2018. James Dong assumed the role of acting CEO in January, succeeding outgoing CEO Bjarke Mikkelsen.

    Mikkelsen had previously noted that Pakistan and Bangladesh are the group’s largest markets.

    Daraz Group, encompassing e-commerce, logistics, payment infrastructure, and financial services, serves more than 30 million shoppers, boasts 200,000 active sellers, and collaborates with over 100,000 brands, according to company statements provided to Reuters.

  • FBR restructuring: 145 offices set up to add 2 million new taxpayers

    FBR restructuring: 145 offices set up to add 2 million new taxpayers

    In a bid to streamline operations, the Federal Board of Revenue (FBR) has set up 145 district tax offices, aiming to bring in 1.5 to 2 million new taxpayers by June 2024. 

    Highlighting the significance of revenue and the need to increase the number of tax filers, the Prime Minister also stressed these goals in recent meetings.  

    The initiative is geared towards expanding the tax base, ultimately achieving the desired tax-to-GDP ratio. 

    Heading these offices are district tax officers responsible for compelling income tax returns from non-filers and preventing lapses from existing filers.  

    This marks a pivotal step in bridging the critical tax gap and incorporating all potential taxpayers into the system. 

    The newly established offices, led by dedicated Inland Revenue Officers in BS-17/18, will leverage third-party data obtained from various departments to track information on asset investments and significant expenditures by potential taxpayers.   

    This approach aims to curtail avenues for individuals evading taxation, particularly in terms of registration and filing returns. 

    The department will invoke the recently introduced Section 114B in the Income Tax Ordinance, 2001, to enforce compliance, enabling it to disconnect utility connections (such as electricity and gas) and block mobile SIMs if returns are not filed in response to issued notices. 

    A new documentation law is also in the works to mandate agencies and departments to provide data to the FBR through an automated common transmission system. 

    The Federal Board of Revenue has sought collaboration with the National Database and Registration Authority (NADRA), and the Chairman of NADRA is ensuring assistance for the expansion of the tax base through data integration. 

    This comprehensive initiative not only strengthens the FBR’s capacity to enforce tax laws but also facilitates taxpayers by establishing dedicated offices, ultimately fostering a more efficient and effective taxation system. 

  • World Bank proposes tax reforms with 3% GDP growth projection for Pakistan

    World Bank proposes tax reforms with 3% GDP growth projection for Pakistan

    The World Bank has advised Pakistan to implement taxes on the agricultural and real estate sectors and merge the income thresholds for salaried and non-salaried individuals to create a progressive Personal Income Tax (PIT) system.

    If agriculture income and property taxes are effectively enforced, they could contribute 3 per cent of the GDP annually, totaling over Rs3 trillion. The World Bank is awaiting approval for a $350 million allocation for Pakistan under RISE-II, with the meeting date yet to be confirmed.

    Currently, the annual income threshold for salaried individuals is Rs600,000, and for non-salaried income, it stands at Rs400,000, both exempt from taxes.

    The World Bank emphasises the urgency of Pakistan’s fiscal situation and the need to generate revenue and reduce expenditures, recommending taxing the wealthy while protecting the poor.

    The World Bank proposes simplifying the income tax structure by aligning it for both salaried and non-salaried individuals, ensuring progressivity without suggesting a reduction in the current nominal threshold.

    They acknowledge the importance of considering inflation and labour market changes in recent data when reforming the income tax structure.

    The focus of the recommended tax reforms should fall on higher income brackets and include a comprehensive tax package and expenditure reforms to address unsustainable fiscal deficits.

    These reforms involve cutting down on subsidy expenditures, eliminating regressive tax exemptions, and increasing the taxation of high-income earners, particularly in agriculture, property, and retail sectors, to enhance the progressivity of the tax system.

    Regarding a question about lowering the current exemption threshold for salaried workers earning below Rs50,000 monthly, the World Bank’s lead economist clarified that the bank does not recommend a reduction in the current nominal threshold.

    Instead, the emphasis is on streamlining the income tax structure for both salaried and non-salaried individuals to ensure progressivity while protecting the poor during the reform process.

  • World Bank reverses suggestion to tax Pakistanis earning below Rs50,000 

    World Bank reverses suggestion to tax Pakistanis earning below Rs50,000 

    The World Bank has retracted its previous recommendation to include individuals earning less than Rs50,000 in the tax system. This reversal comes as the Federal Board of Revenue (FBR) reports that the salaried class has outperformed exporters and the real estate sector in tax contributions over the last three months. 

    The World Bank clarified its stance, stating that it does not endorse reducing the existing nominal tax threshold. The initial suggestion may have been misleading, according to their spokesperson. The organisation now acknowledges that their recommendation was based on 2019 data and should be updated to account for the recent surge in inflation rates and changes in the labour market to safeguard the interests of low-income groups. 

    The World Bank’s previous analysis, which used 2019 data, indicated the potential for a lower tax exemption threshold for salaried individuals within a reformed income tax structure. However, this analysis needs to be revised to reflect current economic conditions. The goal is to ensure that low-income earners are not adversely affected. 

    The World Bank also noted that their recommendation in the Pakistan Development Update (PDU) should have been more explicit about the necessity for new analysis using up-to-date data to inform tax reform decisions. 

    In addition to these points, the Washington-based lender reiterated its suggestion for comprehensive tax reforms aimed at creating a more progressive tax system and placing a greater tax burden on higher-income individuals.

    According to The News, these reforms would involve reducing subsidies, eliminating regressive tax exemptions, and increasing taxation for individuals with higher incomes. The World Bank also recommended improvements in the taxation of agriculture, property, and retail sectors. 

    The statement from the World Bank emphasised that any adjustments to tax thresholds should be based on recent survey data and designed to protect the income levels of those with lower earnings. 

    The initial World Bank suggestion had raised concerns among individuals earning Rs50,000 or less, who are currently exempt from direct taxes. These concerns were driven by the backdrop of soaring inflation and an increased cost of living that has placed significant strain on this income group. 

  • IMF spokesperson urges fair taxation and protection for vulnerable in Pakistan

    IMF spokesperson urges fair taxation and protection for vulnerable in Pakistan

    The International Monetary Fund (IMF) has emphasised that its $3 billion Standby Arrangement (SBA) programme with Pakistan serves as a critical policy framework. This framework addresses both domestic and international economic imbalances while also facilitating financial support from various donors, including the refinancing of outstanding debts.

    According to Geo, during a recent press conference held at the IMF headquarters in Washington, DC, Julie Kozack, the spokesperson for the global lender, fielded questions regarding the IMF’s engagement with Pakistan. These inquiries encompassed Pakistan’s request for relief and permissions within the existing agreement, specifically in relation to rising energy costs, notably electricity bills.

    In response to concerns about potential human rights implications, particularly for minority populations and the vast number of people living below the poverty line (an estimated 92 to 95 million), the IMF spokesperson emphasised that the programme received approval on July 12. It is a nine-month standby arrangement amounting to $3 billion, designed to support the economic stabilisation programme of the Pakistani government.

    The core objectives of this programme revolve around providing a policy framework to address both domestic and external economic imbalances, along with establishing a structure to secure financial support from various donors, both multilateral and bilateral. This includes securing fresh financing and addressing upcoming debt obligations.

    The IMF outlined that policy efforts are focused on implementing the fiscal year 2024 budget, formulating appropriate monetary policies to combat inflation, and continuing reforms to enhance the sustainability of the energy sector.

    These reforms are ultimately geared towards fostering higher, more inclusive, and more resilient economic growth. They also aim to bolster social development and climate resilience by strengthening public financial management, improving tax administration, and enhancing the prioritisation of public investments.

    Furthermore, these efforts are conducted in collaboration with partner institutions, not only the IMF but also the World Bank and the Asian Development Bank, underscoring a collective commitment to Pakistan’s economic stability and development.

    Kozack also highlighted IMF Managing Director Kristalina Georgieva’s strong stance on poverty and inequality. She emphasised the importance of wealthier segments of society bearing a fair tax burden, particularly in a context where Pakistan’s tax-to-GDP ratio is notably low.

    The IMF’s commitment extends to safeguarding the interests of the poor and vulnerable members of society within the programme’s framework, aligning with the goal of achieving a more equitable and inclusive society.

  • No extension for tax return deadline, only commissioner-requested extensions accepted

    The Federal Board of Revenue (FBR) has officially announced that the deadline for income tax return submissions remains unchanged, concluding on September 30.

    However, individuals may request an extension of up to 15 days by submitting an application to their respective commissioner.

    FBR officials report that over 1.7 million tax returns have already been filed, with expectations of the total reaching over Rs2 million by the September 30 deadline.

    More to follow..