Withholding tax likely on vehicles

www.dawn.com


By Khaleeq Kiani

ISLAMABAD, Feb 14: The government is considering certain tax adjustments to overcome revenue shortfall estimated to have occurred owing to law and order situation following the assassination of Benazir Bhutto in December.

Sources in the Federal Board of Revenue said a set of proposals was currently under discussion, but a final picture would emerge in the next few days.

One of the proposals relates to levy of 2.5 per cent withholding tax on all imports, sale and purchase of vehicles by introducing amendments to Section 231(B) of the Income Tax Ordinance, said the sources, adding it means a proportionate increase in the prices of vehicles.

As such, the price of small car being sold at Rs400,000 would increase by Rs10,000, while a vehicle being sold at Rs1 million would become expensive by Rs25,000.

The FBR has been indicating to reduce revenue target because of shortfall that started to emerge in the early days of December and later aggravated with the assassination of Benazir Bhutto.

It has, however, been asked to make efforts to bridge the gap through tax adjustments to partially offset the shortfall in the remaining five months of the current year.

Higher revenue shortfall is expected because of slowdown in exports which occurred due to gas and electricity shortages the industry faced during the last two months.

The textile industry alone has estimated a loss of $1 billion in its exports as a result of energy shortages although the government disagrees with the estimate and believes it has been put on the higher side to seek better compensation in the shape of incentive packages from the government.

The overall industrial sector has also shown signs of a slowdown in the first five months of the year — even much before the turbulent month of December.

Official data puts manufacturing growth rate for July-November period at 6.9 per cent, much lower than the annual growth target of 10.5 per cent.

The FBR has been saying that it has suffered a revenue shortfall of about Rs30 billion in first six months.