National Board of Revenue (NBR) may bring some changes in taxes proposed in the national budget for five key sectors in response to repeated demands from businessmen and people concerned.
Decisions regarding the changes have been taken in principle at the higher policy level and discussions are on with the stakeholders of some other sectors, official sources said.The proposed advance tax on import of raw materials and capital machinery, VAT on e-commerce, imposed tax on enlisted companies’ reserve fund or stock dividend, and the extra 5 per cent source tax imposed on income from savings certificates may be withdrawn.
Also, the VAT imposed on products or service providers to government and private offices may be reduced, the sources added.
Scope of VAT has been widened as the government seeks to implement new VAT law from the next fiscal year.
However, proposals for VAT imposition and tax increase on these sectors have drawn flak from different quarters including businessmen, economists and lawmakers.
Trade bodies and economic analysts demanded that the imposed taxes be withdrawn for the sake of businesses and giving relief to limited income people.
Taking into considerations these recommendations, the policymakers have decided to make the changes to proposed fiscal measures, which will be finalised while passing the finance bill before the budget is okayed.“Some proposals for making changes to the proposed budget have come to us which we’re considering seriously,” an NBR high official said, refusing to comment on whether they’ve taken any final decision with regard to this.
In the budget of FY20 announced on June 13, five per cent advance tax was imposed on import of industrial raw materials and capital machinery.
After criticism from business people and in consideration of investment bottlenecks, NBR in a special circular has temporarily withdrawn the advance tax on capital machinery import, while the taxes on raw materials still exist. This will be withdrawn in the revised finance bill.
Besides, VAT rate on supplying product and service to government and private offices was 5 per cent earlier, which has been proposed to be raised to 7.5 per cent. Now, the rate will return to 5 per cent again.
The 7.5 per cent VAT imposed on online virtual business on social sites is being reduced to 5 per cent in a bid to establish a balance with conventional departmental stores that pay 5 per cent VAT.
There are arguments that the proposal for a 7.5 per cent VAT on online business is being withdrawn may squeeze the scope of e-commerce which is still new in the country.
In the proposed budget, source tax on the profit of savings certificate investment was increased from existing 5 per cent to 10 per cent, which drew criticism from lawmakers. Now, the rate is returning to the previous rate, NBR sources informed.
Moreover, 15 per cent tax was imposed on enlisted companies on an extra portion of the reserve fund compared with their paid-up capital.
This tax is being withdrawn because of fear of withdrawal of foreign investment and a slide in investment level.
Similarly, 15 per cent tax was imposed on unlisted companies in the offerings of bonus shares to encourage companies to provide cash dividends.
This tax might be withdrawn as well in consideration that it might hinder the process of expanding the capital base of companies while cash dividends will benefit the owners.