The Senate Standing Committee on Finance has approved proposals to impose a tax on profits earned from insurance policies, as part of the ongoing review of the Finance Bill.
Finance Minister Muhammad Aurangzeb told the committee that Pakistan must transition toward new business models, noting that the super tax has been reduced and the operational model of FBR is being fundamentally restructured.
The FBR Chairman briefed the committee that progress is being made toward digital monitoring of business activities, and modern digital systems will be installed in mills instead of deploying FBR officials on site.
Industries that do not integrate with the proposed digital monitoring system will face an additional 2% tax under the measures being discussed during the Finance Bill review sessions.
Insurance policies that mature after seven years or have a tenure of seven years will be exempt from the newly proposed insurance profit tax under provisions included in the Finance Bill.
Committee Chairman Saleem Mandviwalla stated that repeatedly reintroducing failed systems is not a solution, and he requested a detailed account of all FBR reform experiments conducted over the past 10 years.
The Large Scale Manufacturing Association expressed strong reservations over the proposed refund system, stating that the industry already faces heavy financial pressure and will not pay double taxation.
Representatives of the association told the committee that large industrial units pay monthly electricity bills of Rs 150 million to Rs 170 million, while many smaller units pay Rs 150 million to Rs 200 million.
The telecom industry told the committee that FBR is failing to meet its targets and is instead placing an ever-increasing tax burden on the nation through successive rounds of revenue measures.
Committee Chairman Mandviwalla asked telecom representatives whether the industry would pay higher taxes if the advance tax rate on telecoms were raised to 8 percent, replacing the current rate.
Telecom company representatives confirmed they would submit the increased tax amount, and Committee Chairman Mandviwalla subsequently demanded written assurances from the telecom companies before the matter is concluded.
The committee also reviewed the Finance Bill clause by clause, with FBR officials providing detailed briefings on proposed reforms and explaining the rationale behind each individual legislative provision.
Concern was also expressed during the session over the declining trend in exports, and Chairman Mandviwalla proposed reducing the tax rate on exporters to one percent, recommending it be treated as a final tax.
