The government’s recently announced indirect tax (super tax) is intended to assist the country in increasing tax revenue and lowering the budget deficit, according to Finance Minister Miftah Ismail.
He was relating to the large industries’ 10 per cent super tax or poverty alleviation tax.
13 industries, including LNG terminals, sugar, cement, steel, textile, tobacco, fertiliser, banks, oil and gas, beverages, automobiles, and steel, will be subject to this one-time levy, according to Miftah. The government labelled these 13 industries for a special tax as they made significant profits last year.
Companies in these sectors earning more than Rs300 million will be subject to a 10 per cent super tax, he added.
According to the finance minister, this tax is a one-time levy that will only be in effect for fiscal year 2022–2023.
He clarified on Twitter that the 4 per cent super tax will be imposed on all industries.
“For the specified 13 sectors, another 6 per cent will be added for a total of 10 per cent,” he said. “So their tax rates will go from 29 per cent to 39 per cent. This is a one-time tax needed to curtail the previous four record budget deficits.”
The imposition of a super tax on the wealthy, according to Finance Minister, will lessen the country’s reliance on foreign aid, lower the budget deficit, and bring the country closer to financial stability.
Other businesses that make over Rs150 million will be subject to a 1 per cent super tax, and those that make over Rs200 million will be subject to a 2 per cent tax. On top of the current rates, it is worth noting that these taxes are additional.
Businesses that earn more than Rs250 million in revenue will pay a 3 per cent super tax, and those that earn more than Rs300 million will pay a 4 per cent super tax.
He continued, citing statistics, that there were 9 million retail and wholesale establishments in Pakistan, and that the government wanted to bring an additional 2.5–3.5 million into the tax system.
“We are linking the income tax and sales tax of these shops with the electricity bill,” Miftah said. “Now, small shops will pay a fixed tax of Rs3,000 and large shops will pay Rs10,000.”
Only 22 of Pakistan’s more than 30,000 gold trading companies, he claimed, were registered, and their average annual sales came to Rs4,000.
Sales tax and a fixed income of Rs40,000 will now be paid by gold shops of 300 square feet or less.
He said that the government would lower the sales tax on large stores from 17 per cent to just 3 per cent.
The withholding tax on jewellery sales to gold shops by the general public has been reduced from 4 per cent to 1 per cent.
According to Miftah, fixed tax structures similar to these will be introduced for real estate agents, car dealers, and builders. Since this tax only applies to income and not to spending, inflation will not rise.
Additionally, the withholding tax for the IT sector has been eliminated. Sales and income taxes would not apply to IT companies with annual revenue of less than Rs80 million.
Miftah emphasised that Pakistan needs the IMF programme to resume as the country’s foreign exchange reserves are at a critical point.
