Pakistan government slaps additional taxes to shore up revenue

Pakistan’s salaried class is staring at an additional tax burden with the government slapping Rs 10 billion income tax on their expenditures on medical treatment, various allowances and their savings in provident and pension funds

Jun 14, 2021
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Pakistan’s salaried class is staring at an additional tax burden with the government slapping Rs 10 billion income tax on their expenditures on medical treatment, various allowances and their savings in provident and pension funds.

To give effect to the Rs 10 billion taxes, the government has omitted a minimum of six clauses from the second schedule of the Income Tax Ordinance through the Finance Bill 2021 that it laid before parliament on Friday.

But Finance Minister Shaukat Tarin told The Express Tribune on Sunday that he has asked the Federal Board of Revenue to reconsider the budget proposals affecting the salaried class. The reply of the FBR Chairman Asim Ahmed was awaited till the filing of the story.

Tarin had vowed that he would protect the salaried people from the tax burden and refused to accept the International Monetary Fund’s (IMF) condition to change the slab rates for the salaried class, Tribune reported.

However, the salaried class has been hit by the decision of taxing their allowances and savings. While speaking at the launching ceremony of the Economic Survey, Tarin had said that the IMF demanded to slap Rs150 billion taxes on the salaried class.

It seems the FBR’s top hierarchy has not taken the finance minister into full confidence before proposing legal changes.

The government has already withdrawn Rs 100 billion worth of taxes that it wanted to collect from the next fiscal year by introducing taxes on the use of cellular networks and internet data.

The Finance Bill 2021 showed that the government omitted Clause 139 of the Ordinance that deals with giving exemptions on employees’ medical reimbursement. This has been done to generate Rs 1.82 billion in revenue.

 “The only benefit of medical reimbursement or free medical facility left with salaried class is intended to be withdrawn by the federal government,” Dr. Ikramul Haq, Pakistan’s renowned tax expert, said.

Haq said without increasing slab rates, the government has tacitly increased the tax burden by 57 percent, in case an employee received major medical treatment like heart surgery.

In a bid to generate Rs7 billion additional revenue from the salaried persons, the government has slapped 10 percent tax on provident fund contributions exceeding Rs 500,000.

The government has also proposed an amendment in Clause 23C of the second schedule to tax the pension funds.

To recover another Rs1 billion from the salaried people, the government has proposed to omit Clause 39 from the second schedule to take special allowances of the employees, except entertainment and conveyance allowances.

 (SAM)

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