The National Assembly Standing Committee on Finance and Revenue on Friday granted approval for bringing pensions exceeding Rs10 million annually into the tax net, at a proposed rate of 5 percent. This move marks a significant step towards broadening the tax base and generating revenue from high-income retirees.
During the discussion, MNA Muhammad Jawed Hanif Khan commented on the implications of this new measure, suggesting it might pave the way for taxing all pensionable amounts in the future. He speculated that initially, only a limited number of individuals, likely including Judges of higher courts, would fall under this new tax bracket.
Heated Debate Over FBR’s Enhanced Recovery Powers
The NA Panel also engaged in a contentious debate regarding the Federal Board of Revenue’s (FBR) proposal for the immediate deduction of tax amounts following a favorable decision from the High Court. Parliamentarians from both the Pakistan Peoples Party (PPP) and Pakistan Tehreek-e-Insaf (PTI) strongly opposed this proposal, arguing that it constitutes an infringement on the taxpayer’s fundamental right to appeal. They maintained that the FBR should not be allowed to withdraw funds from a taxpayer’s account immediately after securing a High Court ruling, especially when further appeals to the Supreme Court are possible.
FBR Chairman Rashid Mahmood Langrial made concerted efforts to convince the committee members, asserting that the tax amount would have already been proven at three to four prior forums, making its recovery justified once the High Court rules in FBR’s favor. However, the Parliamentarians remained firm in their stance, advocating that due tax amounts should only be collected after exhausting all available legal forums, including the Supreme Court of Pakistan.
Ultimately, the Chairman of the Committee intervened, instructing the FBR to reconsider its proposal and present a revised draft of this legislation in the Finance Bill. He warned that the committee would reject such expansive powers for the FBR if the existing wording remained unchanged.
Amendments Approved for Banking Sector Taxation
In another key decision, the NA Panel approved amendments proposed in the Income Tax’s Seventh Schedule, which currently provides special tax treatment for the banking sector. The FBR had put forth five specific amendments aimed at disallowing banks from incorporating certain expenses for tax payment purposes. These expenses include the rented buildings of banks and advances made towards Non-Performing Loans (NPLs), signaling a move to streamline and potentially increase the effective tax rate for the banking industry.
