Latest news with #NationalAssemblyStandingCommitteeonFinance
Business Recorder
11 hours ago
- Business
- Business Recorder
IMF rejects tax rebate for teachers, researchers: FBR
ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, Saturday, informed the National Assembly Standing Committee on Finance that the International Monetary Fund (IMF) has rejected proposal of the FBR to allow 25 percent tax rebate to teachers and researchers from July 1, 2025. The FBR chairman informed the committee that the FBR has twice approached the fund, but they have not agreed. The IMF wants harmonisation of taxes and not allowed the said tax rebate to teachers/researchers. However, the government can give subsidy from budget if possible. MNA Nafeesa Shah stated that the government can give some kind of special allowance to teachers. Budget FY26: Aurangzeb announces major tax relief for salaried class, solar sector State Minister of Finance Bilal Azhar Kayani regretted that there is no fiscal space available in 2025-26. The National Assembly Standing Committee on Finance approved the revised procedure of arrest in cases of tax fraud as approved by Senate Standing Committee on Finance. The FBR chairman informed the committee that the FBR has its own jails to keep persons involved in tax fraud and it can also use other jails for this purpose. The government has incorporated four major safeguards for allowing arrests on tax frauds in order to avoid misuse of powers. In the first pre-requisite, the minister said that the accused of tax fraud would be arrested where there was a fear of his escape, but it would be done with the approval of three members of the Board, including FBR Member IR (Operations) and FBR Member Legal. The tampering of proof could be the second reason, and the third reason could be tax fraud amounting to Rs50 million. The fourth condition of the arrest, he said, would only be possible if someone received three notices but not bothered to respond. The FBR chairman informed that the relevant clause of income tax exemption to pensioners has been deleted from the Income Tax Ordinance to tax only pensions above Rs10 million. The committee recommended that the withholding tax should be increased from 0.6 per cent to 0.8 per cent on cash withdrawals from banks by non-filers. However, the committee rejected the proposal of Senate Standing Committee on Finance to raise tax rate from 0.6 per cent to 1 percent. On the taxation of salaried individuals, the FBR chairman informed that only one per cent tax would be applicable on salaried individuals where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000. Copyright Business Recorder, 2025
Express Tribune
2 days ago
- Business
- Express Tribune
NA panel reviews FBR powers
The National Assembly Standing Committee on Finance on Thursday directed the Federal Board of Revenue (FBR) to incorporate safeguards before closing bank accounts of unregistered businesses, amid widespread tax evasion and underreporting by businesspeople. The committee, which met here with its chairman Syed Naveed Qamar in the chair, reviewed the FBR's proposed measures to enforce sales tax compliance, including the disconnection of utilities and temporary freezing of bank accounts for non-filers. During the meeting, FBR Chairman Rashid Mahmood Langrial gave a briefing to the committee. He said that unregistered businessmen would not be able to operate a bank account under sales tax laws, adding that such a person would be served a notice prior to the closure of the bank account. "The bank account of an unregistered person will be reactivated within two days after registration," he said. He revealed that out of 300,000 industrial units in Pakistan, only 30,000 to 35,000 were registered with the authorities. Explaining reasons, he acknowledged that the tax rate in Pakistan was high. "One-third of manufacturers are not registered in sales tax. People who even come under the tax net do not file returns," Langrial said. "Those who pay taxes underreport their incomes," he told the committee. "Electricity theft alone costs Rs500 to 600 billion every year." When asked how the FBR would identify businesses not paying sales tax, the FBR chairman explained that the income declared for income tax purposes would be used to estimate the volume of sales, supplies and overall business activity. Action would then be taken against individuals who fail to register, he added. Committee member Javed Hanif supported the FBR's proposals but the committee chair cautioned against enacting a law aimed at catching tax evaders if it also adversely affects compliant businesses. Another Committee member, Sharmila Farooqi, suggested that instead of making the penalties more stringent, the taxpayers should be given incentives. "Reduce the tax rate. It will broaden the tax net and encourage the people to get them registered. Finance Minister Muhammad Aurangzeb replied that the tax threshold and process would be improved. however, he made it clear that tax exemptions and amnesties would not be given anymore. "The time for tax exemptions and amnesties has passed. People have to be brought into the tax net." Langrial urged the committee to allow the FBR to temporarily deactivate the bank account of unregistered businessmen. The committee, however, directed for including safeguards in the process. Petroleum levy Meanwhile, the committee approved a proposal to increase the rate of petroleum development levy (PDL) to Rs90 and impose carbon levy on petrol, diesel and furnace oil. Finance Ministry officials told the committee that there was a proposal to impose the PDL on furnace oil as well. The officials said Rs100 billion in revenue was expected from the PDL on furnace oil. They added that 1.2 million tons of furnace oil was imported for 1,000MW Independent Power Producers (IPPs). The Power Ministry secretary said that the target of PDL recovery in fiscal 2025-26 was set at Rs1,468 billion. The Finance Ministry officials said that the government expected Rs45 billion in revenue through the carbon levy. The committee chair asked how much amount the Centre would get if the levy was turned into a carbon tax. On that the officials said that the amount in that case would be Rs18 billion. The committee was informed that the entire amount of a levy went to the federal government, but in taxes, provinces also get share. The chair stressed that the committee was not taking any decision regarding a levy or a tax on petroleum products. The industries secretary told the committee that Rs10 billion from carbon levy would be spent of the promotion of electric vehicles. He added that 30% of the vehicles would be shifted to electric vehicles by 2030. The production of all types of vehicles in the country is around 150,000, the officials said, adding that there were 76,000 electric vehicles in the country at present. "In the next five years, the production of electric vehicles will be increased to 2.2 million," the secretary said.
Business Recorder
3 days ago
- Business
- Business Recorder
Solar power: Curb the bigger beast of net-metering first
News is out that the National Assembly Standing Committee on Finance has unanimously rejected the proposed 18 percent sales tax on the import of solar panels. But does the episode end here — or is it only the beginning? When the budget was announced earlier this month, the government, under the guise of withdrawing tax exemptions, appeared to go all out in its attempt to impose new taxes. In a press conference, seated alongside Finance Minister Muhammad Aurangzeb, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial sought to justify the proposed sales tax, arguing that it aimed to ensure a level playing field between local solar panel producers and imports. He further explained that Pakistan is moving toward eliminating tax exemptions — a key requirement of the International Monetary Fund (IMF) program — rather than extending them. On paper, it all made sense. And yet now, there is a reversal. Let's park this U-turn for now. A more pressing issue looms: the glacial pace of reform on net-metering regulations. Electricity consumption and off-take have declined — a trend driven by high tariffs and the rising adoption of rooftop solar. While the attempt to impose an 18 percent sales tax on imported solar panels may have been directionally correct, it was unlikely to meaningfully slow solar adoption. In 2024 alone, imported solar panels added a cumulative generation capacity of 17 GW — more than one-third of Pakistan's total installed capacity of around 46 GW. Even with the proposed tax, solar adoption would likely have continued unabated. At best, the tax would have yielded modest government revenues. At worst, it would have driven more transactions into grey markets and encouraged smuggling. So while the tax had the right intention, it was misdirected. The real policy focus should be net-metering. What happened to the announcement by the energy minister and the Economic Coordination Committee (ECC) about revising the net-metering buyback rates? That decision stalled at the cabinet level. Why? It's important to examine who remains on the grid. Most are those who cannot afford to solarize their homes. Behind the façade of net-metering lies an inconsistent policy framework increasingly captured by elite interests. The current policy places an undue burden on non-solar consumers, resulting in higher tariffs and undermining the power sector's long-term sustainability. Net-metering was originally introduced to encourage solar adoption by allowing consumers to sell excess electricity back to the grid at an attractive rate of Rs 27 per unit. On paper, it was a win-win. But there's a fundamental flaw: these consumers not only reduce their own bills but also export surplus electricity — generated at minimal cost — back to the grid at artificially high rates, even when the country has excess capacity and power utilities are unwilling or unable to buy more. With global solar panel and installation costs falling, payback periods for solar systems are shrinking rapidly. At the heart of the issue lies a core question: why should the grid be obligated to purchase surplus electricity when there is no demand for it? As more rooftops go solar, daytime electricity generation often exceeds consumption, forcing utilities to buy power they don't need — and at fixed prices that don't reflect true market value. In March 2025, the ECC approved a revised buyback rate of Rs 10 per unit. The decision aligned with recently approved grid-level solar projects by NEPRA, which secured the lowest-ever tariff bids of Rs 8.9 — a truer reflection of renewable energy costs. But the decision was held up in the cabinet. Rather than endorsing it, members called for broader "consultation," postponing ratification and instructing the Power Division to resubmit after further review. Beyond the buyback rate, the current net-metering framework has other serious flaws. Consumers are allowed to install systems up to 1.5 times their sanctioned load — enabling the installation of excess capacity, which places even more strain on grid users. According to one study, this unregulated rooftop solar boom causes the government to lose Rs 100 billion annually and raises tariffs for grid-connected consumers by Rs 2 per unit. This creates a feedback loop — rising tariffs push more people toward solar, which in turn raises tariffs further — what the Arzachel study accurately calls the 'utility death spiral.' Moreover, net-metering is currently only available to consumers with 3-phase meters. Ironically, this excludes much of the lower-income population and prevents solar from being used effectively as a tool to reduce theft and losses in high-loss areas. Pakistan stands at a pivotal juncture in its energy and fiscal policymaking. While solarisation is a vital step toward sustainability and energy independence, the current policy architecture has disproportionately benefitted a small, affluent segment — while the majority bears the rising cost of an increasingly strained grid. The delay in rationalising the net-metering buyback rate reflects how vested interests continue to shape national energy policy — often at the expense of equity and long-term viability. As capacity payments mount and the grid loses relevance to behind-the-meter generation, the system edges closer to fiscal and operational collapse. As the government prepares to finalise the Finance Bill 2025, what is urgently needed is a balanced, inclusive energy roadmap — one that moves beyond blunt incentives toward targeted, data-driven mechanisms that reflect real-time grid dynamics and ensure shared benefits. The longer these distortions persist, the deeper the inequities will become.
Business Recorder
3 days ago
- Business
- Business Recorder
Tariff rationalisation: Rs500bn revenue loss estimated
ISLAMABAD: The government has estimated revenue loss of around Rs500 billion on account of tariff rationalisation including changes in import duties in the next five years under National Tariff Policy. Briefing on customs tariff reforms, Ministry of Commerce Secretary Jawad Paul told the National Assembly Standing Committee on Finance, Wednesday, that the estimated revenue impact is Rs500 billion. Various models including macro model, export forecasting model and Global Trade Analysis Project (GTAP) model, import tariff revenue show a loss of about Rs500 billion in static calculations under National Tariff Policy (2025-30). In the next five years, a positive revenue impact of 7-9 percent has been calculated on revenue considering all factors of customs tariff rationalisation; i.e., increased demand, economic growth, transparency, decrease in under-invoicing, smuggling, compliance cost. The GTAP calculations show that the exports will increase by 10-14 percent, whereas, imports will increase by 5-6 percent. During the meeting, committee members inquired about rationale behind calculations of increase in exports and imports. Paul responded a separate technical briefing on calculation models/ trade equilibrium models would be arranged for parliamentarians on this issue. He said that the outcome of the Free Trade Agreements signed with certain countries had a negative impact on the country. The Commerce secretary stated that there is an institutional shift of taking away import tariff policy from the Federal Board of Revenue (FBR) to the Ministry of Commerce. Tariff Policy Board is a recommendatory body to the Federal Cabinet which has taken the final decision on Finance Bill (2025-26). The target of new National Tariff Policy is to reduce overall tariffs from 20.19 percent to 9.70 percent, readjustment of customs duties slabs to 4 slabs (0 percent, 5 percent, 10 percent and 15 percent) from existing 5 slabs in five years, reduction in customs duty to a maximum of 15 percent in five years, elimination of RDs/ACDs in five years and phasing out of Fifth Schedule of the Customs Act. The existing additional customs duties (ADCs) slabs will be eliminated in four years, keeping in view the annual targets for reduction in ACD rates. The ACD rates would be reduced across 7,500 items with complete exemption for lower slabs. Few products at 35 percent Customs duty are subjected to auto sector policy, therefore, the auto sector ACDs will be eliminated gradually from July 1, 2026. The existing regulatory duty slabs will be eliminated in five years, keeping in view the annual targets for reduction in RD rates. The maximum rate of RD is proposed to be reduced from 90 percent to 50 percent to rationalise excessive para-tariffs. RDs will be fully removed on 554 raw materials and intermediary goods. RD rate will be reduced on 602 goods. The notifications to implement these changes will be issued from July 1, 2025, he maintained. Responding to a query, Paul stated that there is no upward revision of slabs of customs duties, DCs and RDs under the tariff reforms and only downward revision in import duties. He said that the new tariff policy would also be applicable on auto sector like other sectors. Auto sector tariff will also be rationalised to enhance competitiveness, productivity and common welfare including removing quantitative restrictions on import of old and used vehicles. The new auto policy would be introduced from July 2026. Finance Minister Muhammad Aurangzeb informed the committee that the tariff rationalisation is a big change and a permanent implementation committee has been constituted to monitor impact of tariff rationalisation on domestic industries as well as impact during transition period. Copyright Business Recorder, 2025
Express Tribune
3 days ago
- Business
- Express Tribune
'52% duty cut to boost exports'
Listen to article The government on Wednesday claimed a drastic 52% cut in import duties will lead to exports rising faster than imports, while revenues will grow by one-tenth. However, it admitted these projections are based on calculations by the World Bank. Proceedings of the National Assembly Standing Committee on Finance revealed that the government is venturing into uncharted territory, largely relying on the World Bank's Global Trade Analysis Project (GTAP) model. The committee was briefed by the Ministry of Commerce on the new National Tariff Policy, which is being described as "Pakistan's East Asia moment" aimed at increasing exports and reducing the trade deficit. Under the new policy, the average applied tariff rate will fall from 20.2% to 9.7% over five years — a 52% drop — Secretary Commerce Jawad Paul told the committee. He claimed exports will rise at twice the pace of imports due to tariff reforms. According to the GTAP model, exports are expected to grow 10-14%, while imports would rise only 5-6%, said Paul, adding this would help improve the trade deficit despite a lower protection level. When asked about these projections, Finance Minister Muhammad Aurangzeb said, "These are assumptions — some may work and some may not." Leader of the Opposition Omar Ayub Khan raised concerns about the implications of reduced tariffs on reserves, inflation, exports, and imports. He questioned the assumptions behind the optimistic forecast and asked how such drastic tariff cuts could lead to higher exports without hurting reserves. The government failed to provide clear answers and admitted that the World Bank developed the numbers using its GTAP model. Khan demanded the model be shared with the committee. The government did not present the model at the meeting and instead promised a separate briefing by the World Bank and commerce minister. Khan insisted the briefing be open to the media, but Aurangzeb said the World Bank may not agree. Concerns were raised over foreign consultants using a one-size-fits-all approach that ignores Pakistan's ground realities. Officials from the finance ministry, Federal Board of Revenue (FBR), and commerce ministry could not clearly explain the impact on inflation, imports, reserves, or fiscal balance. "Trade tariff reform will be painful as inefficient firms will shut down," said FBR Chairman Rashid Langrial. Secretary commerce said that in the first year (FY26), the tariff rate would drop to 15.7%, cutting the protection wall by 22.3%. This will be achieved by reducing average custom duty to 11.2%, additional custom duty to 1.8%, and regulatory duty to 2.7%. PPP MNA Nafisa Shah noted that while the world is moving towards protectionism, Pakistan is granting unilateral concessions by reducing tariffs. Pakistan's issue has been high tariffs, and despite concerns, there is a need to lower protection under the Most Favoured Nation (MFN) regime of the World Trade Organisation (WTO), said Paul. He added that financial resources will shift to efficient sectors as export production increases. The industry will expand, jobs will grow, and investment will strengthen. The committee was told revenues would rise 7-9%, versus an estimated Rs500 billion loss in static calculations. For FY25, the FBR projects a net revenue gain of Rs47 billion, factoring in a Rs235 billion hit from tariff cuts. Gains would come from other changes, including Rs27 billion from easing age limits for used car imports. Paul said various models including macro, export forecasting, and GTAP showed a Rs500 billion static loss from tariff changes. But when adjusting for factors like demand, transparency, smuggling reduction, and compliance costs, GTAP forecasts a 7-9% revenue gain. He said three additional goals are part of the new tariff policy: export-led growth through level playing fields; support for green initiatives and energy-efficient industry; and promotion of advanced technologies like AI, robotics, nanotech, electronics, and chemicals. Additional customs duties will be phased out in four years, regulatory duties in five years, and exemptions within five years. The number of slabs will shrink to four, with a top rate of 15% within five years. Auto sector products with 35% custom duty are covered under the Auto Policy. These duties will be phased out from July 1, 2026, said Paul. Auto sector tariffs will be rationalised to enhance competition, productivity, and consumer welfare. Quantitative import restrictions on old and used vehicles, subject to quality and environmental standards, and the differential tariff structure will also be eliminated. A new Auto Policy will begin July 1, 2026, featuring major duty reductions and review of SRO 655, SRO 656, and removal of all ACDs and RDs. Products with no concessions under the 5th Schedule will move to the 1st Schedule. Items with concessionary rates will also shift to the 1st Schedule, either under MFN rates or the closest existing slab. The FBR and commerce ministry assured the committee that no new duties will be imposed on agricultural machinery and that all existing duties are trending downward. Finance Minister Aurangzeb said a committee under his chairmanship has been formed to monitor implementation of the new tariff policy and make adjustments as needed. "If raw material tariffs are reduced, it will help, otherwise industries will collapse," said PTI's Mubeen Arif Jutt. Immediate changes In the budget, the commerce ministry has proposed eliminating the 2% additional duty on zero custom duty slabs, affecting 2,156 tariff lines. The 3% custom duty will drop to 0%, lowering costs on 896 tariff lines. Similarly, the 11% CD will fall to 10% on 1,023 lines, and the 16% CD will reduce to 15% for 486 lines. Additional custom duty rates have been cut by 1% for the 7% slab; the 6% rate drops to 4%, and the 4% rate drops to 2%. The 2% ACD slab has been scrapped entirely.
