The National Assembly on Thursday passed the amended Finance Bill 2025 after key coalition partners reached an agreement, making arrests for tax fraud a bailable offense while approving several tax exemptions and new taxation measures.
It is encouraging that the government demonstrated flexibility in amending some of the proposed laws, reducing tax rate and granting relief to some segments of the society on the basis of input from the Upper House and public outcry against some harsh measures. However, by and large, the original spirit of the budget has been retained, obviously because of understanding with the International Monetary Fund (IMF) and the need to increase the tax collection as part of the strategy to help the country stand on its own feet.
In a country where monitoring, vigilance and enforcement is very weak, the authorities concerned need to formulate budgetary proposals with utmost care as impact of the tax measures announced at the time of presentation of the budget in the National Assembly is instantly seen in markets and prices are never adjusted downwards even if the tax rate is reduced or abolished altogether when the Finance Bill is passed. A case in point is levy of 18% GST on imported solar panels, which has now been lowered to 10% in the face of nation-wide opposition to the measure. Market reports suggest a sharp increase in prices immediately after presentation of the budget and the hike is unlikely to come down as an eight percent reduction in tax has been announced. The cost of solarization for the general public has increased but the government might not be able to collect worthwhile tax on this account as importers reportedly imported solar panels in bulk in anticipation of imposition of the GST. Oil prices are already on the higher side in Pakistan and with this in view the decision to impose carbon levy at the rate of Rs. 2.50 a litre amounts to addition of uncalled for burden on consumers. The decision to change the nomenclature of the levy from Carbon to ‘Climate Support Levy’ will not make any difference for masses. The decision to raise the ceiling of the taxable income from the existing Rs. 600,000 to Rs.1.2 million will come as a big relief for those whose income falls in this category but regrettably confusion prevails about the decision despite announcements by PPP leader Bilawal Bhutto Zardari and Deputy Prime Minister Ishaq Dar as this amendment, as per media reports, is not reflected in the revised Finance Bill. The PPP surely deserves credit for championing the cause of low income groups and mitigating the impact of some harsh measures contained in the original budget but unfortunately its demand vis-à-vis a hike in salary and pension increase has not been responded to by the government. As against this, the government agreed to grant tax exemption on pensions of some influential public office holders and succumbed to the pressure in sparing prominent institutions from the levy of income tax. No doubt, some of the welfare institutions were engaged in noble pursuits but a majority of them are earning hugely in the shape of consultation fee and laboratory charges whereas their free treatment is funded from Zakat funds. The grant of wholesale exemption from tax mitigates against the stated goals of the Government to make the tax reforms equitable. The grant of arrest powers to the Federal Board of Revenue (FBR) was a bone of contention even among the coalition partners and a compromise has been made by inserting safeguards against arbitrary arrests. Under the new policy, arrests in tax cases can now only be made in instances of proven fraud (involving amounts of fifty million rupees or more), not during the inquiry stage and such offences have been declared bailable. The Finance Bill made restrictions on large asset purchases by undocumented individuals. However, following the PM’s direction, these restrictions would not apply to residential houses up to Rs50 million, commercial plots or properties up to Rs100 million, and purchase of vehicles worth up to Rs7 million. It may also be pointed out that there is a tendency not to treat the budget as a sacrosanct document as the Government keeps on changing goal posts throughout the year, undermining the spirit of the budgetary proposals. With this in view, there is a need to stick to the document approved by the National Assembly, avoiding the practice of tampering with developmental allocations that are already on the lower side.
