Finance Minister Muhammad Aurangzeb made a significant announcement on 10 October 2024 regarding the taxation in agriculture sector. Under the National Fiscal Pact (NFP) with the provinces, a new tax will be implemented starting July 1, 2025. This initiative aims to standardize the taxation framework for agricultural income across the country.
During a recent meeting of the Senate Standing Committee on Finance, officials expressed optimism about the progress of discussions with provincial authorities concerning the NFP. The committee anticipates that uniform legislation governing the taxation in the agriculture sector will be introduced by January, with collection efforts commencing in July 2025. This marks a pivotal step in ensuring that the agricultural sector contributes equitably to national revenue.
In response to inquiries about ongoing energy debt reprofiling negotiations with China, Minister Aurangzeb indicated that these talks are advancing well. A MoU is expected to be signed soon, coinciding with the anticipated visit of Chinese Prime Minister Li Qiang to Pakistan next week. Aurangzeb reiterated that Pakistan has formally requested the reprofiling of its energy sector debt.
This request comes in light of heavy capacity payments that have inflated energy costs and led to escalating circular debt. The discussions with Chinese financial institutions will focus on extending the current debt repayment period to ten years, easing the financial burden on the country.
Additionally, during the committee meeting, Yong Ye, the outgoing country director of the Asian Development Bank (ADB), shared that the ADB plans to provide Pakistan with $8.4 billion over the next four years, including $2.005 billion this year. This financial assistance is crucial for supporting various sectors, including those impacted by the upcoming taxation in the agriculture sector.
Action Against Non-Filers
Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial announced a dramatic increase in income tax returns, which have more than doubled to four million. No extensions will be granted for filing deadlines. A crackdown on non-filers is set to begin next month, reinforcing the government’s commitment to enhancing compliance among tax evaders, particularly in light of the impending taxation in the agriculture sector.
Banking Bill Approved
In another significant development, the Senate panel unanimously passed the Banking Companies (Amendment) Bill 2024. The amendments will bolster the governance structure of the State Bank of Pakistan (SBP). Minister Aurangzeb underscored the importance of maintaining the central bank’s autonomy while hinting at future amendments regarding the dual nationality of top SBP executives.
Concerns Over Trade Imbalances with Iran
The committee also deliberated on imposing a 10% levy on transport and business operations between Pakistan and Iran. Reports indicate that Iranian authorities impose a 10% deduction from fares of Pakistani vehicles transporting goods, while Iranian vehicles are exempt from similar charges. The FBR has raised this issue with the Ministry of Communications, urging them to address it with Iranian officials to ensure equitable treatment in bilateral trade.
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