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TAX NEWS - JUNE 2010

Pakistan Tax: Federal budget 2010-2011: Harsh taxation, token relief expected

The next budget (2010-11) will unveil tough taxation measures, including hiking the standard tax rate of GST by one per cent to 17 per cent from the existing 16 per cent, abolishing sales tax and income exemptions and increasing excise duty on cigarettes, air conditioners, refrigerators and other items.
The federal government is going to present the next budget in the National Assembly tomorrow (Saturday) in which it will reiterate its commitment to impose Value Added Tax (VAT) in 2010-11 after evolving consensus among all stakeholders to fulfil the IMF/WB main condition for multibillion dollar financing.

The federal and provincial governments' representatives are going to hold another round of talks today (Friday) to iron out differences on VAT though it has been decided that no announcement in this regard would be made in the budget speech.

VAT or no VAT, the FBR's tax collection target of Rs1,667 billion will remain unchanged for the next fiscal year, though the ministry of finance is pressing the FBR to go for Rs1,700 billion target.

The FBR has proposed capital gains tax with different rates ranging from 7.5 per cent on stock market shares to 17.5 per cent for holding shares depending on timeframe. "The imposition of capital gains tax on stock market share is expected to yield around Rs5 to 6 billion during the first financial year 2010-11," a senior official of the FBR confirmed to this scribe.

The FBR, he said, has not proposed to abolish exemption of CVT on land transaction up to one kanal and it would continue in the coming budget. The government is unlikely to allow import of reconditioned cars while taxes on the local cars will remain unchanged.

On relief side, the FBR has proposed to the government to increase ceiling of taxable income for the salaried class. The government will also include X-Ray film in the list of duty-free items. The list of raw material with zero-rated regime will be expanded in the next budget.

Excise duty on air conditioners and refrigerators is likely to be doubled, from existing 5 per cent to 10 per cent in the next budget. On cigarettes it will be increased substantially, close to 70 per cent, in accordance with the international standards.
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