Home / Interviews / Increase in tax rate, PSDP’S cutback may push inflationary level; Govt must follow TRC recommendations
Increase in tax rate, PSDP’S cutback may push inflationary level; Govt must follow TRC recommendations

Increase in tax rate, PSDP’S cutback may push inflationary level; Govt must follow TRC recommendations

A conversation with Mr Ashfaq Yousuf Tola –FCA, a renowned tax expert

Profile:
  • Fellow Member of Institute of Chartered Accountants of Pakistan
  • Fellow Member of the Institute of Cost & Management Accountants of Pakistan
  • Life Member of Karachi Tax Bar Association
  • Life Member of SAARC Chamber of Commerce and Industry
Achievements:
  • Presentation to IMF on Single Stage Sales Tax in December 2015
  • Visited Turkey as an official of Government of Pakistan to study Turkish Tax System & authored a report on Turkish Taxation System
  • Knowledge of more than 40 Jurisdictions around the Globe and co-authored report with Dr. Hafeez Pasha on Sindh Provincial Taxation System
  • International Speaker on Pakistan Economy and Non-Resident Taxation in 2018 at Dubai, Abu Dhabi and Jeddah
Areas of expertise:
  • Tax Planning and Advisory
  • Assurance and Business Advisory Services
  • International Mergers and Acquisitions
  • Corporate Finance and Investment Advisory
  • Due diligence and Forensic audits
  • Financial Product Designing and Launching
  • Public Listings and Corporate Affairs
Key positions held:
  • President, Tola Associates
  • Member Board – Privatization Commission, Government of Pakistan
  • Chairman, Sub-Committee on Taxation for promotion of Islamic Banking Ministry of Finance, GOP
Federal Board of Revenue, Government of Pakistan:
  • Member Tax Reforms Implementation Commission (2016-18)
  • Member Tax Reforms Commission (2015)
  • Member Tax Advisory Council (2014-15)
  • Member Taxation Reforms Coordination Group (2011-13)
  • Member Revenue Advisory Council (2011)
Institute of Chartered Accountants of Pakistan:
  • Member Council (Present)
  • Chairman, Fiscal Laws Committee (Taxation) (Present)
  • Chairman, CA Joint Committee (Present)
  • Member Investigation Committee (Present)
  • Member Examination Committee (Present)
  • Member Public Sector Committee (Present)
  • Member Overseas Coordination Committee (Present)
  • Member Regional Committee – (Southern Region), (1993-1996)
  • Secretary of Regional Committee (Southern Region), (1996)
  • Member Education and Training Committee, (1994-95, 95-96, 96-97)
  • Member Technical Services Committee (1992-93, 93-94)
  • Chairman Chartered Accountant Students Association (1993)
South Asian Federation of Accountants:
  • Member Fiscal Law Committee (Present)
  • Member Tariff Committee (Present)
Pakistan Institute of Corporate Governance:
  • Member Board of Directors (Present)
  • Member Audit Committee (Present)
Karachi Club
  • President (2012 and 2013; 2016 and 2017)
  • Honorary Secretary (2008)
  • Member Managing Committee (2003, 2004)

PAKISTAN & GULF ECONOMIST had an exclusive conversation with Mr Ashfaq Yousuf Tola regarding Mini Budget for the Fiscal Year 2018-19. The excerpts of the conversation are as follows:

The amendments have been proposed in Income Tax Ordinance, 2001, Sales Tax Act, 1991, Federal Excise Act, 2005 and Customs Act, 1969 vide Finance Supplementary (Amendment) Bill, 2018 (FSB-2018). Earlier, amendments were also introduced vide Finance Act, 2018 (FA 2018) in these laws.

Mr. Asad Umar, Minister for Finance, Revenue and Economic Affairs, while increasing tax rate for high earning individuals, claimed that only 70,000 individuals would be affected by such increase. The maximum additional revenues, as per my calculation would be hardly Rs. 17 billion to Rs. 18 billion. Reduction in Public Sector Development Programme (PSDP) will trigger higher inflationary levels and would act as anti-growth. If the target of 6% growth in GDP is not achieved, the government will not be able to generate enough employment opportunities to meet regular employment demand, let alone its tall claim of ten million employment opportunities. Recent increase in gas tariff compounded with reduction in PSDP will also add to higher inflation and consequent increase in the discount rate. As per the calculations as of June 2018, cost of 1% increase in discount rate is Rs. 127 billion, resulting in additional budget deficit of 0.35% of GDP.

To increase the tax revenues and tax net, drastic tax reforms are required as suggested by Tax Reform Commission (TRC), headed by Mr. Masoud Naqvi and actively participated by 24 members specially Mr. Abid Shaban, Advocate. The efforts and recommendations of TRC were also applauded by the World Bank. I am much grateful to Mr. Asad Umer for acknowledging recommendations of TRC and I hope that Implementation of Tax Reforms Commission (TRC) recommendations will continue at a fast pace. If the current government continues to follow its estimated revenues and expenditures, its total deficit for five years will be Rs. 9,273 billion. The same was Rs. 6,018 billion and Rs. 9,016 for PPP and PML(N) tenure, respectively.

FA 2018 introduced reduced income tax rates for individuals. As a result of such reductions in tax rates (from 30% in case of salaried and 35% in case of others to 15%), tax liabilities of individuals were slashed in more than half in comparison with tax liabilities of tax year 2018.

 

FSB 2018 proposes to omit section 227C and remove restrictions imposed vide FA 2018. The restriction was much effective in increasing the tax net as more and more individuals were registering themselves with FBR and were filing their returns to become filer and to be able to perform the transactions. This proposed amendment and has far reaching impact and promulgation of this section helped curbing the speculative business in real estate and automobile sectors. This amendment will affect broadening the tax base.

FA 2018 imposed restriction on non-filer on first registration of new motor vehicles. The restriction was also imposed on transfer of immovable property valuing more than Rs. 5 million in the name of a non-filer. FSB 2018 proposes to omit section 227C and remove restrictions imposed vide FA 2018. The restriction was much effective in increasing the tax net as more and more individuals were registering themselves with FBR and were filing their returns to become filer and to be able to perform the transactions.

Finance Act 2015 introduced section 236P to charge advance tax at 0.40% on all banking transactions by non-filers if transactions in a day exceeds Rs. 50,000. The instruments include demand draft, pay order, special deposit receipt, cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveler’s cheque or any other instrument of such nature. FSB 2018 proposes to increase the tax rate from 0.40% to 0.60%.

Through Finance Supplementary (Amended) Bill 2018 rates for salaried and other than salaried individuals have been proposed to be amended. The tax rate for the salaried and other than salaried individuals are unchanged up to taxable income of Rs. 200,000/- per month. However, the individuals earning monthly taxable income more than Rs. 200,000/- will be charged as per revised tax slab.

Check Also

Healthy competition and growth very likely to improve the quality of professional education in Pakistan

Healthy competition and growth very likely to improve the quality of professional education in Pakistan

KSBL is instinctive in keeping its curriculum modern and according to market needs Better policy …

Leave a Reply