Govt likely to reverse tax concessions for salaried class

The government looks set to reverse tax concessions extended by the PML-N government to benefit high-earning salaried and non-salaried individuals substantially more than the middle-class workforce.

"We are considering reverting back to the income tax brackets applicable in the tax year 2017," an official source told media who is privy to budget-making process for 2019-20.

On Sunday, a high-level meeting will be held where tax proposals will be reviewed for consideration in the next budget, the official said, adding more such meetings will be followed on discussing the tax proposals.

It is estimated that the reversal of tax rates for salaried individuals will help to pocket extra amount of Rs14 billion in the fiscal year 2019-20. It is estimated to collect income tax amount to the tune of Rs103bn from salaried individuals in the current fiscal year. The PTI-led coalition government has already reversed some incentives through the amended Finance Act 2019 given to business enterprises and individuals through the Finance Act 2018. Last year, the government had given sweeping tax cuts to low salary earners, raising the exemption threshold almost three times to Rs1.2 million from Rs400,000.

Instead of enjoying zero tax, a nominal tax of Rs1,000 for individuals in income brackets ranging from Rs400,001 to Rs800,000 and Rs2,000 for individuals in income brackets ranging from Rs800,001 to Rs1.2m was introduced in the budget. For higher income earners, the previous government had scaled down the maximum slab to 15 per cent from 35pc in one go. However, the maximum slab was enhanced to 25pc through the amended Finance Act 2018.

According to the official, it is also under consideration to adopt the tax year 2017 slabs for taxing the income of non-salaried individuals. The estimated revenue from reversing to the previous slabs will help government to pocket extra amount of Rs24bn in the year 2019-20. For the current fiscal year, it is estimated that the FBR will raise an amount of Rs66bn under income tax from non-salaried individuals. Similarly, the revision of tax slabs to the year 2017 will help to raise additional income tax of Rs5bn from association of persons in the tax year 201920. Currently, the Federal Board of Revenue (FBR) estimates to collect tax of Rs14bn from association of persons.

According to official, all these proposals regarding slab-wise tax rates and exemptions threshold are under consideration and a final decision will be taken by the cabinet. It is also proposed that effective enforcement of proposed measures will help to raise extra Rs2bn from sugar and steel sectors in the year 2019-20.