Tax to be collected from retailers from July: Aurangzeb

ISLAMABAD: Minister for Finance Muhammad Aurangzeb has said that the government began registration of retailers on a voluntary basis in April and invited them to register themselves through an application, which was only done by 75 people.

“In May, the FBR’s workforce mobilised and registered 31,000 retailers,” he said, adding that this campaign will continue as the collection of tax will begin from July.

At the very outset of the Post Budget Press Conference held at P-Block on Thursday, the journalists protested over the hike in taxation on salary slabs, saying that only voiceless segments were penalised heavily through taxation measures. After showing signs of protest, they sat down and asked the minister to resume his post-budget briefing.

In the traditional press conference flanked by Minister of State for Finance Ali Pervez Malik, Secretary Finance Imdad Ullah Bosal and FBR Chairman Amjad Zubair Tiwana, the finance minister hoped that the staff-level agreement with the IMF would be struck in July 2024 after passing of the budget by parliament.

He said that virtual talks were underway with the IMF and, so far, moving in the right direction. He hinted that the government was preparing a scheme for retailers and argued that the fixed scheme introduced by former minister Miftah Ismail should have been implemented in FY2022-23. “The retailers and wholesalers will have to come into the tax net,” he said. “We protected [them] as much as we could... We have no choice but to bring this sector into the tax net.”

Aurangzeb extended an apology if SIMs of anyone were blocked wrongly. However, the FBR chairman said that notices were sent to non-filers who did not file their returns in the last few years. After passing through the process, the SIMs were blocked.

The minister said that there was a massive leakage of taxation and cited examples of the Track and Trace System (TTS) and Point of Sale (POS) which failed to yield any desired results. “The FBR possessed complete data about consumption and they knew how much tax one used to pay,” he said and added that a data analytics team would be hired to check the veracity of this data.

Amid reluctance to give any guarantees for presenting no more mini budgets, the minister defended the massive taxation measures undertaken in the budget and argued that the imposition of GST on branded milk could be afforded by middle-class earners.

To another question about the Dubai Leaks, the FBR chairman said the minister was assigned to prepare a presentation to share updates and the FBR sent out notices and tax demands. He said the tax demand of Rs6 billion was pending in appeals.

Secretary Finance Imdad Ullah Bosal explained that the salary increase was provided by running a basic pay scale. To another query regarding increasing the amount of monetisation of cars for Grade-20 to 22, he said that no such proposal came under consideration.

The finance minister said that the hike in petroleum levy from Rs60 to Rs80 per litre would not become effective in totality from July 1, 2024 but it would be implemented gradually keeping in view the pricing trends in international market. He said that the cash in circulation was hovering around Rs9 trillion and digitisation of the FBR would bring all kinds of economic activities into the tax net.

Ali Pervez said that he was doing constituency-based politics and knew economic miseries being faced by the common man but the economic realities were also quite apparent and how long the country could run by printing currency notes or through borrowed money.

The Shehbaz Sharif government opted a difficult path and now everyone including salaried class would have to contribute Rs1,000 to Rs1,500 in lower slabs of over Rs50,000 to Rs100,000 per month earning.

Aurangzeb said that actions should be louder than the words and added that there was no other option but to jack up tax to GDP ratio. However, the government could not mention any implemented step to reform the expenditure front. Each and every expenditure head has witnessed an upsurge in the range of 25 to 30 percent in the budget for 2024-25.

Secondly, when asked about relief, both Aurangzeb and Ali Pervez could only mention increased allocation for BISP, utility stores and provision of subsidies for protecting life-line power consumers using up to 200 units. The minimum wages, the finance minister said, were jacked up from Rs32,000 to Rs37,000.

The minister stated that work was in progress to close down certain number of ministries within the next couple of months under the devolved subjects. But the government undertook no drastic steps to reduce expenditures including pension, subsidies and others but only committed that the decisions were taken and execution would get started after a couple of months.

He said the government had shelved PWD and more such departments would be abolished. On making revision in the NFC Award, he said that consultation with the provinces was underway and added that the provinces would have to increase revenues and cut down expenditures.

The finance minister elaborated five key principles for budget making in 2024-25 including expanding narrowed tax base standing at 9.5 percent of GDP to over 10 percent. In next two to three years, the tax to GDP ratio would be increased up to 13 percent. “No country could sustain without increasing the tax to GDP ratio keeping in view the international benchmark or it would have to borrow,” he said.

He said the undocumented economy would be brought into the tax net through digitisation and improving compliance and enforcement. Thirdly, all out efforts would be made to introduce technology in order to minimise human interaction between taxpayer and tax officials. He said the government moved towards progressive taxation as the tax burden for filers went up significantly. “This concept of non-filer which only exists in Pakistan would be abandoned,” he said and added that ‘non-filer’ term would be eliminated. Fifthly, he said that vulnerable segments of the society would be protected.

Aurangzeb said the government aims to reform the power sector and privatise state-owned enterprises (SOEs), including power distribution companies, to create fiscal space for social and developmental projects.

He emphasized that reducing the government’s involvement in business affairs would enhance fiscal space. Among the initiatives underway, the privatisation of Pakistan International Airlines (PIA) and outsourcing of Islamabad International Airport are expected to be completed in the upcoming financial year. Subsequent plans include outsourcing the Lahore and Karachi airports, with data rooms currently being developed for this purpose.

To facilitate these changes, the government has enacted the State-Owned Enterprises (Governance and Operations) (Amendment) Ordinance 2024, eliminating legal barriers to dissolving the boards of power, petroleum and other state-run companies.

Aurangzeb highlighted the restructuring of power distribution companies (Discos) by replacing political appointees and government nominees on their boards with private sector representatives. The new boards will primarily consist of members from the private sector.

Regarding strategic assets within SOEs, Aurangzeb noted that with one unnamed exception, all SOEs have been deemed suitable for privatisation. Deliberations on this matter are ongoing.

The government is also considering the dissolution and merger of devolved ministries and departments in consultation with provincial authorities. The recent decision to dissolve the Public Works Department (PWD) marks the first step in this process.

A committee led by the Planning Commission deputy chairman has presented a report to the prime minister, recommending the abolishment of certain government entities and merger of others.