The government of Pakistan came up with a new tax reforms package this year in order to strengthen the tax collection system in the country. Through this reform, the government wishes to offer relief to the taxpayers and provide them great value for their taxation amount. Given that complicated taxation reforms are arduous to implement and fail to convince people to pay their taxes, the new reform is a very simple to understand agenda consisting of five key points:
- CNIC Number becomes the NTN Number
With the aim of keeping track of every individual’s taxation activities who owns a valid CNIC, the CNC number now becomes his/her NTN number. The data and information becomes centralized and gets automatically linked to the taxpayer’s CNIC.
- Income Tax Reduction
The tax brackets have been revised by the government in the updated tax reforms which are easier to understand as compared to the previous ones. Earlier, eight tax brackets were used by the government for self-employed and twelve tax brackets for salaried persons for the calculation of their income tax charges which has been reduced to only four tax brackets. Also, the limit of tax exemption on yearly income has been increase to Rs.1.2 million assuring that if an individual is earning less than or equal to Rs.100,000 he or she is not obligated to pay any income tax and is entitled to be completely exempt from the tax.
- Amnesty Scheme
Non-taxpayer individuals are given an opportunity to show up their income and assets from foreign countries or any local source by compensating with nominal charges. This scheme is valid only once upon the nontaxpayer’s assets or income declaration. The Amnesty Scheme is effective for all individuals who own undeclared assets or income made earlier than 30th June, 2017. These people are provided with one-time relief from the tax liability and are asked to pay a very little price in terms of penalty. Later, in the coming year, all such individuals will be obligated to pay the regular taxes.
- Tax Reforms for the Property Sector
Tax evaders find real estate market as their safe hideout and use this sector for parking their black money tacitly. The actual worth of the property is entirely different from the declared worth. Hence, the new reform declares that any citizen purchasing a property will be required to submit 1% presumptive tax. This amount will then be adjusted in their yearly taxes. Moreover, only one percent tax is recommended for property registration both local as well as provincial. The advance income tax at federal level has also been cut down to one percent. Therefore, with the intention of discouraging the under-invoicing practice, the government now possesses the right to purchase any property that is owned by a resident by giving hundred percent over the property’s declared value.
- Compliance and Observation
The most significant feature of the new reform is the compliance and supervision of taxpayers. The transactions of any person having a valid CNIC is now monitored by the government of Pakistan and in case of tax evasion a notice is issued so as to make the citizens responsible towards their tax liabilities.
The new tax reform is destined to gather the people of Pakistan under the tax net umbrella and encourage and support them to submit their tax returns on time. These reduced tax rates and support from Pakistani citizens will help in the economic growth and stability of the country.