Govt. continues progressive tax reforms mitigating burden on the poor
The government is continuing the implementation of a progressive tax reform package introduced in May 2022 in the New Year 2024 as well with some tax hikes including Value Added Tax (VAT) maintaining exemptions on basic food and some essential items, Finance Ministry sources confirmed.
The impact of the VAT increase to 18 per cent from 15 per cent is to be mitigated for the benefit of ordinary citizens with the elimination of additional taxes on goods and services under VAT and adopting necessary tax adjustments, a top official of the ministry disclosed.
Furthermore, it was revealed that nearly 90 essential items, including educational services, electricity, health, medicine, passenger transportation, as well as all vegetables and fruits, are exempt from VAT.
Additionally, VAT does not apply to 65 types of items subject to the Special Commodity Levy.
The ministry is committed to revamping the VAT system this year, by removing almost all product specific VAT exemptions, he said adding that it will be significantly speeding up valid VAT refunds and abolishing the Simplified VAT (SVAT) system.
Measures will be taken to introduce a property tax, as well as a gift and inheritance tax before 2025, he revealed.
These tax policy reforms focus on base-broadening and progressive measures to mobilise revenue for the tax collection target of Rs 3.82 trillion for 2024 from three revenue collection departments while promoting economic efficiency and equity. The Inland Revenue Department is compelled to double their tax collection efforts and efficiency to collect the major portion of the public revenue estimated at Rs. 2.19 trillion this year.
Revenue administration reforms are to be adapted for the operations of tax collection agencies to the revamped tax system, and to boost their tax collection efficiency.
The Customs Department has been given a revenue collection target of Rs. 1.4 trillion for the year 2024, following its highest revenue collection in history of Rs.970 billion last year.
Excise Department is facing administrative problems due to lack of sufficient staff to carry out day-to-day operations to collect a sum of Rs 232 billion this year, a 12 per cent increase from the last years target of Rs. 179 billion, a senior official of the department said.
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