Sunday, August 14, 2022

Govt proposes Rs10b taxes on salaried class

The government has quietly proposed Rs10 billion in taxes on the salaried class, imposing income tax on their expenses for medical treatment, various benefits, and their savings in pension funds.

But Finance Minister Shaukat Tarin has asked the Federal Revenue Council to reconsider budget proposals affecting the salaried class. The response from the president of FBR, Asim Ahmed, was awaited until the story was filed.

The finance minister had sworn he would protect wage earners from the tax burden and refused to accept the International Monetary Fund’s (IMF) condition to change plate rates for the salaried class. However, the salaried class was hit by the decision to tax their allowances and savings.

Speaking at the launching ceremony of the Economic Survey, Tarin said that the IMF demanded the application of Rs 150 billion in taxes on the salaried class.

The 2021 Finance Bill showed that the government omitted Clause 139 of the Ordinance which deals with granting exemptions from medical reimbursement for employees. This was done to generate revenue of Rs 1.82 billion.

To recover another Rs 1 billion from the salaried people, the government proposed to omit Clause 39 from the second table to receive special employee allowances, except entertainment and transportation allowance.

The revenue impact of Rs1.8 billion is less than the revenue loss of Rs2 billion that the government would sustain due to the proposed capital gains tax (CGT) reduction on stock market trading of securities. The government reduced the CGT rate from 15% to 12.5%.

The government has already imposed Rs 100 billion of taxes on internet data that it intends to collect in the next fiscal year, introducing taxes on the use of cellular networks and internet data.

Dr. Ikramul Haq, Pakistan’s renowned tax expert, said that without raising slab rates, the government tacitly increased the tax burden by 57% if an employee received major medical treatment such as heart surgery.

The government omitted clause (53A) for tax-free or subsidized food provided by hotels and restaurants to their employees during office hours; free or subsidized education offered by an educational institution to the children of its employees; Free or subsidized medical treatment provided by a hospital or clinic to its employees.

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