Ministry of Finance Issues Medium Term Budget Strategy Paper 2021-22 and 2023-24 - Android

The major guiding principles of the Federal Board of Revenue (FBR) new tax policy included reduce dependence on withholding taxes,… Read More

The post Ministry of Finance Issues Medium Term Budget Strategy Paper 2021-22 and 2023-24 appeared first on .

The major guiding principles of the Federal Board of Revenue (FBR) new tax policy included reduce dependence on withholding taxes, corporate income tax reforms, removal of undesirable tax credits, accelerated depreciation, withdrawal of exemptions/reduced rates/exemption from specific provisions etc, Personal Income Tax (PIT) reforms, removal of unnecessary exemptions and rationalization of tax rates and reduction of tax slabs.

This has been stated in the Medium Term Budget Strategy Paper (2021-22 and 2023-24) issued by the Ministry of Finance.

The Medium-Term Budget Strategy Paper revealed that the Federal Board of Revenue (FBR) is contemplating a reduction in the number of withholding tax lines without compromising the documentation purposes of these taxes. Nine withholding taxes have already been abolished and further reduction is under consideration.

The Medium-Term Budget Strategy Paper disclosed that all-out efforts are being made to increase the share of direct taxes in revenues. Documentation of the economy to increase the taxation in services, real estate, and wholesale and retail is a top priority. Using technology for revenue mobilization. The use of information technology is the cornerstone of FBR’s strategy for the mobilization of revenues.

It aims at the automation of all business processes starting from registration to assessment and issuance of refunds. Installation of the ‘Track and Trace’ system, point of sale integration of retailers with FBR’s computerized system, e-audit, and e-appeals are at various stages of implementation and would be fully operational in the medium term. 25. Efficient management of tax litigation.

Large sums of potential revenue are held up in litigation before appellate forums from Commissioners (Appeals) to the Supreme Court of Pakistan. In order to reduce litigation, FBR is encouraging alternate dispute resolution mechanisms, agreed assessment in appropriate cases, and out-of-turn hearing by appellate forums in cases involving large amounts of revenues.

The tax policy measures revealed that the FBR aims at re-designing the tax system on ideal principles of taxation, which, inter alia, includes moving towards taxation of net profits under income tax and subjecting all taxable supplies to a standard sales tax regime. The initiative involves the removal of tax distortions, unnecessary exemptions, tax reductions, zero-rating, etc. Major guiding principles of tax policy include:

• Corporate income tax reforms-removal of undesirable tax credits, accelerated depreciation, exemptions, reduced rates, exemption from specific provisions etc. This aspect has already been completed by the promulgation of Tax Laws (Second Amendment) Ordinance, 2021.
• Personal Income Tax Reforms-removal of unnecessary exemptions and rationalization of tax rates and reduction of tax slabs.
• Rationalization of minimum taxes – The ideal principles of taxation envisage simple, low rate and broad-based taxation structure. In order to achieve this goal, FBR is rationalizing presumptive and minimum tax regimes. (IV) Removal of anomalies in taxation—The present taxation structure is complicated and presents an anomalous situation for various taxpayers, which are required to be removed.

The document revealed that the General Sales Tax on goods involves the removal of unnecessary exemptions, reduced rates, zero-rating and special tax regimes. The broad guideline is that exemptions and concessions available to all goods except essential food items, health and education-related goods are to be reviewed.

Sales tax harmonization – FBR is pursuing sales tax harmonization with the provincial revenue authorities, which includes a common definition of goods and services, a common minimum threshold, harmonized tax rates, single portal and single sales tax return. The initiative is expected to complete in the medium term.

For the promotion of ease of doing business – FBR is aiming at reducing the difficulties of taxpayers. CNIC is being made as a unique identifier for all taxes administered by FBR. Further, the valuation table for immovable properties is being harmonized with provinces.

Presently, Pakistan’s tax system is plagued with the twin issues of a narrow tax base and huge tax gap in various sectors. A two-pronged approach to address these issues, enhanced enforcement and appropriate policy intervention will be pursued.

The fiscal framework will focus on ensuring sustainable, inclusive and equitable growth, increasing social safety spending, controlling inflation, enhancing development spending with a view to increasing employment opportunities. Optimal mobilization of revenue, broadening of the tax base, reduction in exemptions, efficiency in revenue administration.

In the fiscal framework, the strategic priorities of the government include optimal revenue mobilization, broadening of tax base and increase of tax net, reduction in tax expenditure, efficiency in revenue administration, increase in the ratio of direct taxes, and simplification of procedures for facilitation of taxpayers. In view thereof, challenging revenue projections have been worked out for the medium term.

The FBR has already achieved expeditious disposal of refund claims through the “FASTER” system, which has been acclaimed by all stakeholders. Automation and expeditious disposal of refunds are being actively pursued. The initiative will be fully operational in the medium term, the Ministry of Finance added.

This Medium-Term Budget Strategy Paper being presented under the provisions of the Public Finance Management Act 2019 reaffirms the commitment of the Federal Government to implement the principles of transparency, responsiveness, inclusiveness and better financial management during the ensuing three years.

The continuity of the fiscal policies, new policy measures and well-planned government expenditures will facilitate the achievement of the targets and objectives announced by the government in the annual budget before the Parliament. Furthermore, the execution and monitoring of the performance agreements between the Prime Minister and the Cabinet members will also yield positive results in public service delivery.

The post Ministry of Finance Issues Medium Term Budget Strategy Paper 2021-22 and 2023-24 appeared first on .