The National Board of Revenue (NBR) is taking steps to broaden income tax coverage alongside adjustments to Value Added Tax (VAT). As part of its strategy to phase out income tax exemptions, the NBR has amended or canceled several provisions, with additional reforms under consideration.
In a statement on Saturday, the NBR announced the removal of certain income tax exemptions while emphasizing that VAT, supplementary duty, and excise duty changes would not affect essential goods. This ensures no increase in consumer prices or inflationary pressure.
The decision to expand VAT in various sectors was approved during an Advisory Council meeting last Wednesday.
Responding to recent media reports on VAT, income tax, and customs duties, the NBR highlighted its efforts to balance revenue generation with public welfare. These efforts include reducing customs duties on essential goods, enhancing domestic revenue, supporting Sustainable Development Goals (SDGs), and fostering national self-reliance.
Over the past four months, the NBR has exempted VAT and income tax on essential items such as rice, potatoes, onions, sugar, eggs, dates, edible oil, and pesticides to stabilize prices. However, these exemptions significantly reduced revenue, and the NBR warned that failing to boost collections from other sectors could result in a large budget deficit.
To address this, the NBR plans to expand VAT coverage and adjust tax rates during the 2024–25 fiscal year. These measures aim to rationalize VAT, supplementary duty, and excise duty to strengthen revenue collection and ensure fiscal sustainability.
