FPCCI President demands levy of tax on pensions

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Karachi: Nasser Hyatt Maggo, President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has urged that government should consider imposing income tax on monthly pensions of over Rs 100,000 and may slap the tax on judicial allowance and house rent in the next budget as part of a plan to withdraw tax exemptions from the upcoming fiscal year.

He proposed to place a limit on income tax-free pensions being received by the retired civil servants, judges and generals. The idea is to at least tax pension payments to the government servants retired in the highest pay scale.

Tax expenditure reports of 2019-20 showed that the federal government sustained a loss of about Rs 21 billion on account of tax-free pensions. There was revenue loss of Rs 2.8 billion on account of pensions received by a citizen of Pakistan from a former employer, according to reports.

The major loss of Rs 18.7 billion was on account of commutation of pensions of employees and another Rs 21 million due to tax-free monthly installments from the income payment plan invested with a pension fund manager. The annual cost of tax losses has peaked to nearly Rs 1.4 trillion, Maggo added.

According to information the IMF is urging Pakistan to reconsider its tax laws to end such benefits as they are largely availed by the affluent class. It is also proposed that the house rent being availed by the judiciary should be taxed in the budget, which is aimed at ending disparity in the tax law.