Pakistan to get rid of cash transactions, Aurangzeb

Finance Minster says steps are being taken to end term non-filer,

Islamabad(Mudasser Chuhdary) Finance Minister Muhammad Aurangzeb said on Thursday that without broadening the tax base, the economy cannot grow.

In his post-budget press conference here, he said the step was taken to end the term “non-filer” as he was unable to understand it. The term is unique to Pakistan, he added.

Minister says collection of tax from retailers will begin from July,

While responding to a question about whether the salary slab will be revised or remain the same, the minister said that taxes for the exempted class and those in the top slab category have been maintained.

“If you compare it with the non-salaried class, which includes the professional community, we have increased it to 45%,” he said, adding that there are some changes in tax slabs and there is no doubt about it.

However, he maintained that tax base will be broadened with tax to Gross Domestic Product (GDP) to be taken to 13%.

The minister maintained that the 10% tax-to-GDP ratio is unsustainable and in the next 2-3 years they have to take it to 13%.

He further stated that the concept of non-filers is only in Pakistan and no other country in the world; therefore, the tax rate has been increased for non-filers.

Aurangzeb insisted that higher taxes would be imposed on those with higher incomes, adding that no one should object to it.

“The undocumented economy is being digitised on an end-to-end basis,” he said, further stating the development will reduce human intervention and bribery. “Business transaction tax is being increased for non-filers,” he said.

When commenting on taxing retailers, the minister said the government began their registration on a voluntary basis in April and invited them to register themselves through an application, which was only done by 75 people.

Government proposes 45% tax on non-filers in Budget 2024-25

“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.

He insisted that the tax on retailers and wholesalers should have been imposed in 2022. “We protected [them] as much as we could… We have no choice but to bring this sector into the tax net.”

Aurangzeb said digitisation of the economy is a priority for the government, as it will help reduce corruption and increase transparency.

The finance minister acknowledged the significance of freelance professionals in Pakistan, as it has the third largest freelancer population in the world.

With regards to the government’s seriousness towards efforts for the information technology (IT) sector, the minister said: “A huge amount has been allocated for the IT sector. Infrastructure in the IT sector can be improved with the allocated money.”

He explained that tax rate for non-filers and those who do not pay tax had been raised to force them to join the tax net.

At this stage, journalists stood on their chairs in protest against raise in income tax on salaried class.

He said the income tax exemption for those earning Rs600,000 per annum had been maintained. The maximum tax on salaried class is 35 percent whereas tax rate for professionals in the non-salaried class is 45 percent.

Aurangzeb said that the government aimed to raise tax-to-GDP ratio to 13 percent. Below 10 percent tax-to-GDP ratio is unsustainable. This ratio will be raised in three or four years, he continued.

Clarifying raise in tax, he said the government planned to bring retailers and wholesalers into tax net. It was necessary to share the burden of income tax on salaried class.

Regarding increase in petroleum levy, Finance Minister Aurangzeb said it was not being raised with immediate effect. It would be implemented in phases keeping in mind global petroleum pricing mechanism.

He praised the FBR for bringing more retailers and wholesalers into tax net. In April, traders were requested to get themselves registered with the FBR voluntarily and about 31,000 retailers have so far been registered, he added.

He said the undocumented economy is being digitised. Human intervention is reduced by digitising economy, he said and added that the step will help end corruption.

At present, paper currency worth Rs90 trillion is in circulation, he said and added that he wanted to end cash transactions.

For this purpose, the minister said the government would expand the Point of Sale (POS) scheme already continuing in big department stores to document cash transactions as much as possible.

He agreed to a questioner that there was a huge leakage in sales tax. It is our priority to digitise sales tax end-to-end.

Regarding development of IT (information technology) sector, the minister said a huge amount has been allocated for the purpose and expressed the hope that the infrastructure would be improved.

He said five meetings had been held with bank associations during the last two months to discuss means on how to finance agriculture, IT and youth.

He suggested involvement of private sector in fiscal affairs and said the government has to provide them favourable environment.

Whichever sector the government exits, the better, he added.

It may be recalled that Aurangzeb presented the federal budget 2024-25 on Wednesday with a total outlay of Rs18.9 trillion. The budget aimed at a modest 3.6 percent GDP growth for the coming fiscal and set an ambitious Rs13 trillion tax collection target raising income tax on salaried class and removing tax exemptions.