Rise in inflation: Marginal impact of revenue generating measures: SAPM

LAHORE: Special Assistant to Prime Minister (SAPM) on Revenue Dr Waqar Masood has said that there is a marginal impact of potential revenue generating measures on the present increase in inflation as most of the measures had withdrawn by the time budget was passed.

Similarly, so far as the withdrawal of sales tax exemptions is concerned, which again has contributed to the latest rise in inflation, Dr Masood said majority of these exemptions related to income tax.

It may be noted that the economic outlook released by the State Bank of Pakistan (SBP) last month has pointed out that the withdrawal of sales tax exemptions and other potential revenue generating measures in the FY22 budget may lead to an increase in inflation during the fiscal year. Majority of the tax experts, when approached, agreed with the SBP approach.

However, the financial advisor of Chief Minister Punjab Dr Salman Shah attributed it to an increase in the value of dollar as well as oil prices. “It is primarily due to increase in dollar value as well as prices of petroleum products,” he asserted.

Nevertheless, Ch Qamar-uz-Zaman, a member of Pakistan Tax Bar Association, pointed out specifically to the withdrawal of exemption relating to agriculture sector has pushed the prices of edible products upwards, which is leading to inflationary pressure on public. It has increased the cost of living of common Pakistanis, he added.

Muhammad Shahid Baig, another tax expert, said levy of indirect taxes has directly burdened the end consumers due to inflation.

Another tax practitioner Javed Ahmed said any cost additions on account of sales tax to be added in commodity prices would escalate the purchase price and ultimately giving way to inflation.

Another tax practitioner Hussain Sherazi said dollar has appreciated by over 5 percent (from earlier level of Rs156 to Rs164) and since Pakistan imports petroleum products, palm oil, wheat, sugar, and pulses etc., therefore all the imports have become costlier. Similarly, he added, an increase in the minimum wage by the government has contributed to the production cost besides mismanagement in production, supply, and profiteering, especially by the middle man mafia.

It may be noted that the official wheat flour price is Rs950 per 20 kg bag, which is being sold at Rs1235 per bag in the open market, followed by ghee at Rs330 per kg against official price of Rs260 per kg and sugar at Rs104 per kg against official price of Rs85 per kg at Utility Stores Corporation.

Dr Ikram-ul-Haq, another tax expert pointed out that the government has imposed 17 percent sales tax on crude and 10 percent customs duty plus local sales tax on the oil products, which have played havoc with the transportation cost of eatables in the market.

Copyright Business Recorder, 2021