ISLAMABAD -The PML-N government seems to be in confusion on increasing tax rates in budget 2014-15, as disparity on imposing new taxes is evident from the statements of two top economic offices, interalia Finance Ministry and Federal Board of Revenue.
Trying to clarify the Finance Minister Senator Ishaq Dar statement's on increasing tax rates of the country to avoid further loans, the spokesperson of the Finance Ministry said, "The Government does not intend to increase the tax rate in the budget for 2014-15". However, the FBR said that government would have to increase the tax rates except general sales tax (GST) in the budget 2014-15. The GST is already on the higher side.
"The government will maintain the GST at 17 percent but it will consider to increase the other taxes in general, specifically direct taxes in the budget", said one of the top official of the FBR while talking to The Nation. He further said that FBR is working on where to increase the taxes for the upcoming year. "The FBR will increase the taxes, brining non-taxpayers into tax net and eliminate the tax exemptions granted through SROs in order to broaden the tax base of the country", he concluded.
The entire confusion on imposing new taxes surfaced on early Monday when Finance Minister Senator Ishaq Dar in a press briefing in Washington said that government would have to increase the tax rates to avoid taking loans in future. Later, the Finance Ministry issued a statement stating that government has no intension to increase the tax rates but it would increase the revenues by broadening the tax net and by including into the system the people who are not paying their due taxes.
However, sources said that Pakistan had already made a commitment with International Monetary Fund (IMF) for removal of tax exemptions in budget, which would defiantly be bore by the masses of the country. The IMF has asked to take additional taxation measures of Rs 195 billion by eliminating tax exemptions in the budget. The IMF, in second staff review report on the $6.64 billion Extended Fund Facility (EFF), has stressed on additional revenue from tax base broadening, including SRO elimination, would need to total at least 0.5 to 0.75 percent of GDP (in real terms between Rs 130 to Rs 195 billion) per year over the next two years in order to achieve the fiscal consolidation targets without increasing tax rates.
The Finance Ministry statement added, "The purpose of the revenue generation is to invest in essential human and physical infrastructure including building dams to generate cheap electricity and enhance availability of water". The statement mentioned that during the first 9 months of the current fiscal year, the Govt has achieved around 17pc increase in tax collection as compared to the last year.