Proposed new tax measures to raise additional Rs300bn next fiscal year

Proposed new tax measures to raise additional Rs300bn next fiscal year

ISLAMABAD: The government is deliberating on a new set of tax measures in the upcoming budget to raise an additional revenue of around Rs300 billion in 2022-23 (FY23). According to official sources, the Federal Board of Revenue (FBR) has been directed to identify sectors in the next two days. 

Prime Minister Shehbaz Sharif has highlighted the need to focus on direct taxation, especially on the income of the upper class. The suggested measures include a luxury income tax for large properties in affluent neighbourhoods, as well as for luxury vehicles. The proposal may also extend to taxing rental income. 

However, incentives will be offered to attract investors from the business sector.

On the other hand, sectors or products that may affect low-income households will be avoided. 

To tackle the rising import bill, more luxury items will be included in the list of banned items that will be implemented for two months. However, the chambers and industry representatives have already stated that they would not support this move as it has created problems for local businesses in acquiring imported raw materials. 

The boom in the real estate sector in recent years, accelerated by the tax amnesty scheme provided by the former government to the construction sector, is also likely to lead to more taxes in the FY23 budget. 

This includes properties that are of more than 1000 or 1500 sq. yards. The final approval is still pending. The engine capacity of luxury vehicles is also yet to be decided. 

Another proposal on the table is to raise property values for taxation purposes to match current market rates. A further proposal is to make it binding for real estate companies to submit real-time withheld tax from home buyers to the tax departments.

At the moment, the deputy collector rates for property valuation are quite low, and provinces would be asked to increase the DC rates. 

The previous government did raise the valuation table in 44 districts, but an additional increase is still due, especially in Islamabad. 

Another agenda is to propose a plan for working with oil marketing companies to reduce the consumption of petrol and diesel. The import bill of the oil sector is predicted to exceed $20bn by the end of this month.