Page 81 - CMA Journal (Nov-Dec 2024)

O THER F EATURES

Flat -Rate Credit Scheme for Progressive Wealth Tax on High-Net-Worth
Non-GST-Registered Sellers Individuals
Under this scheme, businesses would collect GST at a A progressive wealth tax (1.7%-3.5%) on the top 0.5%
standard 15% rate, with 8.5% credited back to sellers of households could generate 1% of GDP in tax revenue,
for input costs and 6.5% remitted to the FBR. This raising Pakistan’s tax-to-GDP ratio from 10.3% to
initiative would help gradually integrate non-registered 11.3%. This measure would ensure wealthier
sellers into the formal tax system while ensuring fair individuals contribute proportionally, while robust
cost recognition. Encouraging formalization in enforcement would minimize capital flight and
high-growth sectors such as e-commerce, digital services, administrative costs.
and small manufacturing could lead to a 0.5%- 0.7% GDP
contribution to tax revenues. Real Estate Wealth Tax
Mandatory GST Registration for Offshore A real estate wealth tax (0.5%-1.5%) on properties
E-Commerce Sellers valued above PKR 50 million would ensure equitable
contributions from high-value asset holders. This could
Offshore businesses with annual sales exceeding PKR 9 generate billions in tax revenue without burdening
million to domestic consumers would be required to salaried individuals, with funds reinvested in social
register for GST. This measure ensures that cross-border housing, urban infrastructure, and public services.
digital transactions are taxed fairly, preventing Enhancing Tax Compliance through
revenue losses and promoting a level playing field for
local businesses. The estimated revenue impact of this Technology and Governance
initiative is PKR 20-30 billion annually. The introduction of a Compliance Risk Management
Promote Fairness in Taxation via MAT (CRM) framework and a Tax Planning Unit within the
Ministry of Finance would streamline enforcement and
Implementing a Minimum Alternative Tax (MAT) at reduce tax evasion by 5-8% annually. Additionally,
18.5% would ensure that corporations with substantial automating TDS/TCS compliance and implementing
profits contribute their fair share, even when cross-border VAT/GST on digital sales would further
benefiting from tax incentives, loopholes, or secure revenue streams.
aggressive tax planning strategies. This measure would
help minimize revenue losses, enhance tax equity, and Conclusion
improve fiscal sustainability by preventing businesses Pakistan’s taxation system requires bold reforms to
from avoiding taxation despite high earnings.
improve tax compliance, expand the tax base, and
2% Wholesale Equalization Tax (WET) enhance fiscal sustainability. The proposed measures,
including green incentives, global tax alignment, wealth
A 2% WET is proposed for retailers, wholesalers, taxation, and digital transformation, offer a
processed food industries, and certain agricultural comprehensive roadmap to increase tax revenues while
products, in addition to the existing 18% GST. This promoting economic equity.
measure would increase transparency in business
transactions and ensure fair contributions from If successfully implemented, these policies could:
wholesale and retail sectors. This additional revenue is • Increase Pakistan’s tax-to-GDP ratio from 10.8% to
expected to contribute 0.1-0.2% to GDP, bolstering over 12%.
government finances, reducing the fiscal deficit, and
enhancing the efficiency and transparency of the tax • Generate billions in additional tax revenue, reducing
system. reliance on foreign borrowing.

Integrating Exporters into the Regular • Ensure fair taxation across all sectors, supporting
Income Tax System long-term economic growth and fiscal stability.
By adopting these recommendations, FBR can create a
Bringing exporters into the regular income tax system modern, transparent, and effective tax system, driving
and simplifying Personal Income Tax (PIT) by reducing sustainable development and economic resilience in
tax slabs to five while raising the maximum tax rate for Pakistan.
non-salary individuals (NSI) to 45% would ensure fair
contributions from high-income earners. This could lead
to a 0.5%-0.7% increase in the tax-to-GDP ratio while
maintaining economic stability.

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