Sunday, November 24, 2024

Unveiling the Finance Act 2023: Key Changes in Pakistan’s Taxation System

In this comprehensive guide, we delve into the key aspects of the Finance Act 2023 recently implemented by the federal government of Pakistan. The Act introduces significant changes to the country's tax regime, particularly for wealthy individuals and businesses.

We will explore the details of the Act, its impact on various income groups, and its implications for the nation's economic stability. Additionally, we will discuss the recently announced budget for the fiscal year 2023-24, its key takeaways, and the government's efforts to revive the International Monetary Fund (IMF) loan programme.

Finance Act 2023: Tax Slabs for the Wealthy

With a focus on "economic stability," the federal government has introduced three new slabs for individuals paying super tax in the Finance Act 2023. The Act extends the lower income limit for imposing a 10% super tax, applicable to incomes exceeding Rs500 million.

Moreover, the Act imposes a 6% super tax on individuals earning between Rs350 million and Rs400 million annually, and 8% on those with incomes between Rs400 million and Rs500 million.

Federal Budget for the Fiscal Year 2023-24

On June 9, Finance Minister Ishaq Dar unveiled the Rs14.46 trillion budget for the fiscal year 2023-24. This budget is characterized by "no new taxes" and envisions an economic growth rate of 3.5%.

The government's objective with this budget is to secure more bailout money from the International Monetary Fund (IMF) while addressing the country's economic crisis.

Key Takeaways of the Budget

Let's explore some key takeaways from the budget announcement:

  1. No Increase in Duties on Essential Items: The budget does not impose any increase in duties on the import of essential items, aiming to ease the burden on consumers.
  2. Exemption of Customs Duties: Customs duties on raw materials of diapers and sanitary napkins have been exempted, promoting the local manufacturing of these essential products.
  3. 5% Tax on Credit/Debit Card Payments: Payments made through credit/debit cards to restaurants and resorts will be taxed at a rate of 5%.
  4. Simplification of Sales Tax Return: The requirement for filing a sales tax return for availing the concessionary fixed tax rate of 0.25% for IT & ITeS exports has been abolished.
  5. Tax Holiday for Agro-based SMEs: Agro-based industries that are small and medium-sized enterprises (SMEs) set up on or after July 1, 2023, will enjoy a five-year tax holiday from the tax year 2024 to the tax year 2028.
  6. Duty Exemption on IT Equipment: Exporters of IT and IT-enabled services are allowed duty-free import of IT-related equipment equivalent to 1% of their export proceeds.
  7. Waiver of Withholding Tax on Property Purchase: Nonresident individuals holding a POC/NICOP and acquiring immovable property through foreign remittances will enjoy a waiver of the 2% final withholding tax.
  8. Rationalisation of Super Tax: The Super Tax under section 4C will apply to all individuals earning income above Rs150 million. The Act introduces three new income slabs taxed at 6%, 8%, and 10% for incomes ranging from Rs350 million to above Rs500 million.

Government's Efforts to Revive IMF Loan Programme

To revive the stalled IMF loan programme, the government has agreed to impose Rs215 billion in new taxes and reduce spending by Rs85 billion. Prime Minister Shehbaz Sharif met with IMF Managing Director Kristalina Georgieva in Paris to discuss these measures. The negotiations resulted in changes to the budget for the fiscal year 2024, with an increased tax collection target and a reduction in running expenditures.

Finance Act 2023 and the recently announced budget for the fiscal year 2023-24 signify the government's commitment to economic stability and growth. The Act introduces new tax slabs for the wealthy, while the budget focuses on minimizing the burden on the middle and lower-income segments.

These measures, along with the government's efforts to revive the IMF loan programme, aim to strengthen Pakistan's economy and secure financial stability. By effectively implementing these measures, Pakistan is positioning itself for sustainable growth in the coming years.

For more details, check this original document.

Umme Muhammad
Umme Muhammad
Umme Muhammad is a skilled writer specializing in technology, lifestyle, trending news, and education. With a passion for exploring the latest advancements, Umme delivers insightful and engaging content. Her versatile writing covers various topics, including gadgets, software, fashion, travel, health, and wellness. Umme's expertise also extends to curating trending news stories, keeping readers informed about global events.

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