Government Considers Raising Advance Tax on Cash Withdrawals

 Government Considers Raising Advance Tax on Cash Withdrawals

The federal government is contemplating a potential increase in the advance tax levied on cash withdrawals by non-filers from banks in the forthcoming fiscal year budget for 2024-25. Reports indicate that the Federal Board of Revenue (FBR) has proposed raising the advance tax rate on cash withdrawals from 0.6 percent to 0.9 percent for non-filers in the upcoming budget cycle, building upon the initial imposition of a 0.6 percent advance tax in the FY2023-24 budget.

If approved by parliament, this tax adjustment could result in an annual revenue collection of over Rs. 15 billion from non-filers, contributing to the government’s fiscal objectives. Additionally, the FBR has recommended increasing withholding tax on vehicles with engine capacities of 850cc or more, signaling a broader strategy to enhance revenue streams.

Furthermore, the government has decided to initiate a crackdown on individuals who have not registered for the Tajir Dost Scheme, a voluntary tax compliance initiative aimed at simplifying tax filing for small businesses. Notices are set to be dispatched by the FBR to non-compliant entities.

These proposals have been presented to the International Monetary Fund (IMF) for review, with final approval pending from Prime Minister Shahbaz Sharif. The IMF’s recent demands include a further increase in electricity prices, citing an additional burden of Rs. 150 billion on the power sector. The proposed tariff hike, from Rs5 to Rs7 per unit, aims to address concerns over target achievement and the ballooning circular debt, which is projected to reach Rs. 2500 billion by the end of the current financial year.

The Ministry of Energy is engaging in discussions with IMF officials to formulate a plan for electricity and gas tariff adjustments in the next financial year, as part of efforts to mitigate the challenges faced by the power sector and ensure fiscal sustainability.

Also read: Islamabad Implements Substantial Fee Hikes for Driving Licenses and Renewals

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