January 23rd 2018 (MLN): Finance Minister Asad Umar announced the key points of the much awaited Mini-Budget in the National Assembly today among which he pointed out his government’s focus on 3 key sectors, namely Small and Medium Organizations, Agriculture sector and Low-Income Housing Sector.
For small and medium organizations that were being taxed at the rate of 35% on income and 4% super tax – bringing it to 39% – the tax rate is now being reduced to 20%.
Similarly, while pointing out significant improvement in farmer’s access to credit in the first six months of this government, he said that for further improvement, taxes for them withheld by banks are to be reduced to 20% from 29%.
The third sector, that is the low-income house building sector, is also be facilitated in the same manner, said the minister. He also announced the introduction of a Rs 5 billion Revolving Fund scheme for this sector.
Minister Finance further announced that the Withholding tax on cash transactions for Income tax filers is to be removed.
For traders, he mentioned that what was a 6% minimum withholding tax on traders would no longer be the case as it was an unfair practice to subject them to audits and other cumbersome procedures by classifying them as such.
For non-filers, he declared that they would now be able to buy small cars (up to 1300 CC) but the taxes charged on those cars would be raised for these individuals in an attempt to incentivize them towards filing taxes.
He reiterated his commitment towards improving Pakistan’s rankings in the Ease-of-doing-business index and towards that goal, he said that withholding taxes which used to be filed on a monthly basis will now only need to be filed bi-annually, that is, twice a year.
For booking marriage halls, the fixed rate Rs 20,000 taxes imposed on them are being brought down to Rs 5000 now onwards.
To boost industries, Finance Minister Asad Umar announced the reduction as well as elimination of duties imposed on hundreds on raw material line items. Specifically, the Auto industry, Engineering industries and textile industries are to benefit from these duty reductions, he added.
With regard to Special Economic Zones, he said that for Greenfield projects, the plant and machinery that is being introduced for operations there would no longer be subject to any customs, income or sales taxes.
Minister Finance also expressed his government’s resolve to promote renewable energy generation in the country and announced that for the next five years, any business manufacturing these renewable energy generation equipment within the country would not be subject to any customs, income or sales taxes.
Corporate income tax reduction of 1% year after year announced previously would continue while the super tax imposed on non-banking companies is being eliminated effective July 1st.
In a welcome news for stock exchange participants, the withholding tax on trading would now be removed, while capital losses will now be allowed to be carried forward for 3 years.
The only tax increase that the minister specifically mentioned in his budget speech pertained to taxes on cars that were of 1800 CC and above. Mobile phones too would be charged additional taxes, but that would only apply on more expensive phones rather than the cheaper ones.
On the issue of rebates, finance minister has declared the handing out of promissory notes in lieu of those and asked Advisor Commerce to hold a dedicated press conference to help explain exporters on the kind of facilities that were being introduced for them.
Furthermore, the minister announced the reduction of duty on diesel engine to 5% from 17% previously in order to facilitate farmers and also said that the loan capacity index for farmers, currently at 4000 units, would be raised to 6000 units from now on.
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