Govt advised to announce tax incentives for salaried class
Tax experts on Thursday advised the government to consider monetary benefits for salaried class in the next budget, considering job losses and cut in remunerations in the coronavirus tumult.
The experts told The News that any move to revise upward the tax slabs for salaried individuals in the next budget would not be a wise decision. The government is scheduled to present budget for the fiscal year 2020/21 during the next month.
“Although the contribution of salary tax in direct taxes is low, the salaried people are contributing a large share in the indirect taxes,” said Ali Rahim, a senior tax consultant. “Government should consider reducing tax rates at par with rates prevailing in other economies.”
This year’s budget would come in the wake of massive economic losses due to lockdown after coronavirus outbreak. While the government already announced not to introduce any new tax in the forthcoming budget, it might take policy measures and change in tax rates to keep up the required growth in revenue collection next fiscal year.
The Federal Board of Revenue’s tax collection target was envisaged at an ambitious Rs5.1 trillion in 2020/21. The annual collection for current fiscal year was estimated at Rs3.9 trillion, compared to pre-corona era’s estimate of Rs4.8 trillion. The estimated impact of the lockdown on the revenue is around Rs895 billion.
Rahim, who’s a director at chartered accountancy Baker Tilly Pakistan, said the non-corporate tax should be reduced to 20 percent and corporate rate to 25 percent in phased manner.
Zeeshan Merchant, former vice president of Karachi Tax Bar Association said the government should revise minimum income tax threshold and restore slabs applicable for the tax year 2019.
“Salaried class is worst hit due to Covid-19 and the government should extend tax relief to this class,” said Merchant. He advised the government to reintroduce the tax slabs and allow minimum threshold of Rs1.2 million for exempting tax for salaried class in the next budget.
Describing the scenario after the adverse effects of lockdown on all parts of the economy, the experts said massive layoffs are imminent as major industries are forced to shut down. Almost half a million textile and garment industry workers have already been dismissed.
The current crisis is estimated to result in 18.65 million job dismissals in the near future, as per the latest report of Pakistan Institute of Development Economics with 125 million people falling to poverty trap in the worst-case scenario. For those who continue to remain employed salary cuts are significant, spanning widely from 15 percent to 50 percent cuts from pre-COVID payouts across various industries.
On the back of receding industrial production and global lockdown, the miseries of the working class are doomed to exacerbate further. As the salaried class has an important role in Pakistan’s economy, the miseries of this class would have a much wider impact on the national economy, according to the experts.