New taxation measures in the upcoming budget (2024-25) in the range of Rs 1.2 trillion to Rs 1.3 trillion are anticipated, including heightened rates of withholding taxes on transactions by non-filers and increased tax rates on the purchase/sale of immovable properties, vehicle registration, and revisions in income tax brackets for the salaried class.
According to sources from Business Recorder, the government has proposed to the International Monetary Fund (IMF) to raise the income tax exemption threshold up to Rs1 million for the salaried class. Additionally, there’s a proposition to rationalize tax rates for individuals by eliminating the distinction between salaried and non-salaried individuals and reducing the number of rate slabs. The budget makers are also contemplating increasing the disparity in withholding tax rates between filers and non-filers of tax returns.
Several proposals are under consideration to boost revenue, including increased advance income tax on machinery and raw material imports, as well as higher withholding taxes on supplies, services, contracts, and cash withdrawals from banks by non-filers.
Furthermore, the Federal Board of Revenue (FBR) is reviewing exemptions for donations and non-profit organizations, potentially making them eligible for tax credits. The IMF has suggested a comprehensive review of tax incentive regimes to eliminate unnecessary or duplicative incentives and adopt cost-based incentives where necessary.
Regarding the tax system’s structure, the IMF has proposed reassessing the present corporate tax system, personal income tax rate structure, and tackling issues related to tax burdens on different income types, which could incentivize taxpayers to engage in tax planning activities, resulting in economic inefficiencies.
The IMF recommends streamlining the tax system, reducing complexity, and enhancing the investment climate by removing impediments against investments. Additionally, it suggests exploring alternatives to the current taxation system to ensure fairness and efficiency in tax administration.
