Finance Minister Miftah Ismail on Monday said he hoped that the stalled the International Monetary Fund (IMF) deal for the revival of the Extended Fund Facility (EFF) would be revived in a day or so and vowed to provide income tax relief to those with up to Rs1.2 million annual earnings.
He was talking to journalists after a meeting of the Senate standing committee on finance after the government considered increasing the tax target to around Rs7.45 trillion and adjusted some expenses.
The minister also agreed to the suggestion that the government should not tax owners of open plots for ‘deemed’ rental income until they were given complete possession of the plots after development by the housing societies.
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Asked about IMF objections to an increase in salaries, the minister said the “IMF has no relation with the increase in salaries” as long as there was money in the national kitty.
Responding to another question, he said, “the tax exemption to the people earning below 1.2 million [annually] would remain in place.” However, he said, something would have to be done with the overall Rs47bn reduction in income tax collection, suggesting that those on the higher income slabs would have to bear the additional hit.
When asked if the budget would tax people or provide relief to them, the minister said it would depend on the categories of people. “Tax would be imposed on wealthy people and relief would be provided to the poor,” he remarked.
Inside the committee proceedings, senators expressed reservations that the government had proposed a tax on open plots in the budget without realizing that, in many cases, plots remained vacant or their owners were not given the possession in the name of the ongoing development of housing societies.
Therefore, such plot owners faced a double whammy in the shape of stuck-up funds and, at the same time, tax on ‘deemed rental’ on market value.
The minister agreed to change the tax proposal and not to impose tax until the plots were developed and suggested bringing in some time frame before the application of tax. He said the objective was not to collect money but to turn real estate into productive investment and encourage development.
“Lay one brick on the empty land and the taxes will be lifted. But we will not impose a tax on anyone who has not acquired the possession of a plot or has not received the permission to start construction on it,” he said.
Ismail believed the tax system had resulted in an artificial price hike in real estate, making housing facilities out of the reach of the middle classes. The money generated from this dead investment is a significant source of inflation and social disharmony.
“We don’t want to discourage the real estate sector, but we want to steer this sector in a direction where it can become the engine of growth for cities. Our proposals aim at encouraging construction and vertical growth, and discouraging speculative investment in open plots,” Ismail stated.
With input from Dawn