GROWTH INCLUSIVE TAX POLICY: A REFORM PROPOSAL - PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMICS

▪ Streamline the refund system • The Finance Bill seeks to amend the ADR Committee and process by FBR to improve the credibility and efficacy of the ADR. [...] The share of withholding tax has increased to 70% of the total income tax collected by the FBR (which amounts to about 30% of the total tax revenues). [...] The FBR data shows that 35 out of 82 withholding items contributed only 1% of the total withholding income tax; 596 out of 821 items in the case of domestic sales tax; 42 out of 97 for sales tax on imports; 37 out of 95 in the case of customs; and 9 out of 37 in the case of Federal Excise Duty as a percentage of total taxes contributed less than 1% to the revenue generated from the respective tax. [...] To achieve the simplification of the withholding tax regime and reduce the cost of compliance, the Finance Bill 2020-21 proposes the deletion of 9 withholding tax provisions. [...] The higher the depreciation expense, the lower the taxable income and, thus, the more the tax savings.