The Senate Standing Committee on Finance and Revenue has postponed the approval of the Tax Laws (Amendment) Bill 2024, a key legislative proposal designed to enhance the efficiency of Pakistan’s tax collection system and ensure equitable taxation based on income levels.
The meeting, presided over by Senator Saleem Mandviwalla, saw in-depth discussions on the bill’s implications and classifications.
Money Bill or Ordinary Bill?
A significant issue raised during the session was the classification of the bill. Senator Syed Shibli Faraz, the Leader of the Opposition, questioned whether it should be considered a “Money Bill” or treated as an ordinary legislative proposal. In response, the Secretary for Law and Justice, Raja Naeem Akbar, clarified that under Article 73(2) and Article 75 of the Constitution of Pakistan, the bill qualifies as a Money Bill.
Building Public Trust in Tax Reforms
Senator Shibli Faraz emphasized the importance of public trust in the tax system, asserting that meaningful progress depends on fostering confidence in tax authorities. Addressing these concerns, the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, reiterated the government’s commitment to fairness through the “People Process Technology” initiative. He highlighted ongoing efforts to balance the tax burden equitably across various socioeconomic groups, with special consideration for the salaried class.
Proposed Amendments and Challenges
The committee reviewed critical aspects of the bill, which proposes amendments to:
- Sales Tax Act
- ICT (Tax on Services)
- Income Tax Ordinance
- Federal Excise Duty
Chairman FBR, Rashid Langrial, shared statistics on tax compliance, revealing that only 42,000 out of 62,000 registered entities actively pay sales tax. He argued that evasion of sales tax is ethically worse than income tax evasion. The proposed amendments aim to:
- Strengthen the sales tax collection mechanism.
- Broaden the tax base to enhance revenue generation.
Tax-to-GDP Ratio and Economic Impact
In response to queries about the bill’s broader economic impact, the FBR Chairman projected an increase in Pakistan’s tax-to-GDP ratio to approximately 13% within the next four to five years. This growth is expected to stem from improved collection of sales tax, income tax, and customs duties.
Deferred Discussions
While the committee extensively debated the sales tax clauses, discussions on other components of the bill—such as income tax, ICT (Tax on Services), and Federal Excise Duty—were deferred to the next session.
Attendance
The meeting was attended by key stakeholders, including:
- Senator Syed Shibli Faraz
- Senator Mohsin Aziz
- Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb
- State Minister for Finance and Revenue Ali Parvez Malik
- Chairman FBR Rashid Langrial
- Secretary for Law and Justice Raja Naeem Akbar
- Senior officials from relevant departments
The committee’s deliberations underscore the complexities involved in tax reforms and the importance of aligning legislative actions with economic realities. Further discussions are expected to address unresolved matters in the coming sessions.
