To be or not to be Taxed

Through Finance Act 2018, a revolutionary amendment been introduced in the tax law; where, the tax rates have been reduced for individuals to a maximum of fifteen percent


By Anthony Williams
The very first technique in understanding Shakespeare’s plays is to understand “his use of words”. “To be, or not to be” is the opening phrase of a soliloquy spoken by Prince Hamlet in the so-called “nunnery scene” of William Shakespeare’s play Hamlet. Act III, Scene I. This popular phrase describes the dilemma that Hamlet finds himself at this moment in the play. This article asks the fast-forward question from you the reader, that what kind of dilemma will you be at the moment you finish reading it and getting to know about the recent taxes imposed or altered through Finance Act 2018 (popularly known as budget 2018).
Taxing rights of Legislature are unlimited as long as these are not confiscatory (M/s. Elahi Cotton Mills Ltd. & Others v. Federation of Pakistan & Others). Every year the Federal Government of Pakistan in the month of June, though this time it was May; presents the Annual Budget on the floor of the National Assembly (First House of the Legislature) through the finance minister (Our Hamlet) as a Money Bill. After its passing from this house, it moves to the Senate (Second House of Legislature) for passage. Finally, the bill is sent to The president of Pakistan for assent, which turns this money bill into law.
The Finance Act is a list of government’s receipts (taxes imposed on public) and expenditures (salaries etc. of Government employees). This year’s Finance Bill 2018 is now law and called Finance Act 2018. The Act opens with these words “AN ACT to give effect to the financial proposals of the Federal Government for the year beginning on the first day of July, 2018, and to amend certain laws”. The amendments to the Income Tax Ordinance 2001 will now be presented and the dilemmas it brings to public life in Pakistan.
“To shop, or not to shop online”, a new section 236Y in the law, has made it compulsory for every bank to charge advance (income) tax on every debit or credit card transaction(s) that the residents of Pakistan will conduct online for International Shopping, Watching Netflix and with every Website selling goods or providing services from outside of Pakistan. “To be, or not to be an Individual taxpayer”, the present tax law divides all the economic agents in our economy into four different persons. The first person is the Individual, the second is the Partnership Firm (AOP), the third is the Company and the last is the Government itself. Each person has its own set of tax rates, which unfortunately has been the same for all, averaging a tax rate of twenty percent of the total taxable income.
Through Finance Act 2018, a revolutionary amendment been introduced in the tax law; where, the tax rates have been reduced for individuals to a maximum of fifteen percent (not average but maximum) and this benefit is not restricted to Salaried Individuals but is for all Individuals, including Business Individuals.
“To be, or not to be an IT Exporter”, IT (Exporters) Freelancers, are typically Individuals and Businesses providing their IT services online (Pakistan is the fourth largest exporter of such services, according to the World’s biggest freelancing Website and according to existing tax laws, all such incomes earned online are exempt from income tax, provided they are brought into Pakistan through banks. This exemption was to expire on June 30th, 2019 but through Finance Act 2018, this benefit has been extended till June 30th, 2025; the IT Freelancer(s) has just to file his/her annual income tax return every year, reporting his total tax exempt income through FBR’s online tax filing system – Iris (this facility is termed G2C – Government to Citizen). “To be, or not to be a Filer”, the sad story of being a non-filer (a person who does not file his/her annual income tax return) in Pakistan started with Finance Act 2014, which introduced the concept into public life.
Now Finance Act 2018 introduces a new section 227C, which restricts a non-filer from purchasing or importing vehicle(s) and immovable property of value more than five million rupees and getting them registered in their own names [Benami (without name) property can be confiscated by the government]. In conclusion, the right thing to do is to know your “tax rights”, so that they act as a counter balance to the unlimited taxing rights of the Legislature; which some may argue are fast becoming confiscatory through “their use of words”.

Anthony Williams is CEO of Tax Dosti and Professional Accounting Affiliate (ICAP).