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Pakistan

Finance (Supplementary) Bill, 2023: Dar unveils taxation measures as Pakistan looks to appease IMF

  • National Assembly session comes as Islamabad remains desperate to revive its bailout programme with Washington-based lender
Published February 15, 2023

Federal Minister for Finance and Revenue Ishaq Dar introduced on Wednesday the Finance (Supplementary) Bill, 2023, announcing various amendments that feature taxation measures of Rs170 billion (approximately $640 million), as Islamabad moves to convince the International Monetary Fund (IMF) to revive its bailout programme.

The finance minister began his address by criticising the tenure of the Pakistan Tehreek-e-Insaf (PTI) government, arguing that a national committee be formed to investigate the failures that have cost the country’s economy.

Some of the amendments include:

  • FED on first class and business class air travel at 20% or Rs50,000 (whichever is higher) will be imposed

  • Adjustable withholding tax on marriage halls introduced at 10%

  • Increase in FED on cigarette and sugary drinks has been proposed.

  • FED on cement will be raised from Rs1.5 per kg to Rs2 per kg

  • GST proposed to be raised from 17% to 25% on luxury items while it has been increased to 18% on other items. Daily use items including wheat, rice, milk, pulses, meat have been exempted from the increase

  • Increase of Rs40 billion in BISP, taking total allocation to Rs400 billion

Dar said the taxation measures will help reduce the budget deficit, adding that cabinet members would also adopt an austerity approach to help the country at this time of economic distress.

Pakistan has been implementing various prior conditions agreed with the Washington-based lender in hope of reviving the stalled bailout programme at a time when its foreign exchange reserves have depleted to critical levels, covering less than a month of imports.

Background

The National Assembly session comes as talks between the IMF and Pakistan authorities resumed virtually on Monday. The two sides are looking to reach an agreement that will unlock funding critical to keep the cash-strapped country afloat.

The two could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks but said negotiations would continue.

On Tuesday, Dar during his meeting with President Dr Arif Alvi apprised the premier that the government wants to raise additional revenue through taxes by promulgating an ordinance.

However, President Alvi advised that it would be more appropriate to take the parliament into confidence on this subject and that a session be called immediately so that the bill is enacted without delay.

Rs170bn additional taxes: Do it thru bill, Alvi asks Dar

On Tuesday, a meeting of the Federal Cabinet approved the Finance Supplementary Bill 2023 to impose additional taxes on luxury items and an increase of one percent in General Sales Tax (GST).

The meeting of the Cabinet chaired by Prime Minister Shehbaz Sharif on Tuesday approved the Finance Supplementary Bill 2023. The Federal Cabinet was given a detailed briefing regarding the reforms to be carried out in the context of the 9th review of the International Monetary Fund’s EFF.

The meeting was informed that as a result of these reforms, additional taxes are being levied on luxury items while general sales tax will be increased by one percent.

Moreover, the government started the implementation of the mini-budget late Tuesday night by doubling the Federal Excise Duty on cigarettes from Feb 14, 2023.

On Monday, the government increased gas prices by up to 124% for domestic consumers from January 1, 2023, to generate a revenue of Rs310 billion from the consumers in the next six months (January-June 2023) to curtail the circular debt in the gas sector.

In a meeting, the ECC was informed that ERR was issued by the Oil and Gas Regulatory Authority (OGRA) for the fiscal year 2022-2023 on 3rd June 2022 for both gas companies.

As per determination, SNGPL required revenue of Rs261 billion and SSGCL Rs285 billion in the fiscal year 2022-2023 but the OGRA did not allow the previous year’s revenue shortfall.

The hike in gas tariffs was among the prior conditions Pakistan needed to implement to move ahead on the IMF programme.

Comments

Comments are closed.

Maqbool Feb 15, 2023 04:28pm
The President is correct, when you have an elected Parliament , they should pass Laws and Ordinances and not through Presidential Ordinance and or SRO’s , a terrible trend by our Democracy. They should remember that Taxes can be imposed and passed by Parliament but cannot be retrospective,to the day of the Bill being passed .Or again thousands of Court cases wil arise and stay orders .
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Haq Feb 15, 2023 05:54pm
Welcome to another vicious cycle of taxation, inflation, loans, corruption, looting / plundering, burdening common people, govt employees will get pay rise, politicians will get more funds..... Can't save economy with prevailing system & feudal mentality
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bonce richard Feb 15, 2023 06:04pm
@Maqbool , Absolutely correct elected parliament can pass the bills and ordinances. But unfortunately in our so-called Punjabi Islamic Republic of Pakistan, where no one knows what is democracy. At midnight the door of the Supreme Court opens and changes the regime by hook or crook. When a corrupted army there what happens and We wish our country will be divided into various parts. Bengali decision was perfectly right so they separated from the Punjabi people.
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bonce richard Feb 15, 2023 06:25pm
@Haq, Feudal mentality is in our blood, especially in Punjabi. When Quaid tried to remove this system they removed him then Liaquat Ali Khan tried to remove the feudal system they killed them, this so-called Islamic Republic of Pakistan where 60% of the poor people and 40% rich army dominate the country.
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Yogesh (India) Feb 15, 2023 07:27pm
What a pity Pakistan as a nation has became. Obsessed to match India have ruined .A frog cannot become elephant.
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Shiteistan Feb 15, 2023 07:42pm
Dar ul Fail. Daronomics fail. Dar now begging the world. Dar cannot look the IMF in the eyes. Dar said "I dont care what IMF demands". Dar now licking boots, especially of the IMF junior staffers. Ha hah ha ha. What a FinMin !!!
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Arshad Feb 15, 2023 08:04pm
The same President(from PTI) had been issuing Ordinances after ordinances. Was he right then?
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Pakistani1 Feb 15, 2023 09:49pm
Good idea for Parliament to debate and pass these laws which impact life of citizens. Time to stop management by Ordinances, a trend that PTI government used heavily.
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Taimur Khan Feb 15, 2023 11:01pm
Where is the tax on real estate...on agriculture....on traders...we decide to tax the poor thru gst...salaried people already overburdened...why not real estate trillion rupee sector...what about agriculture...pay as u earn...eliminate the arthi and connect the farmer to the markets by constructing sabzi mandis outside all big cities and metro type stores...the money the farmer saves from arthis can be taxed. Give farmers export incentives and help them export fruit and other crops...tax.rice and sugarcane that use more water and incentivise cash crops...teach them water management and better farming techniques using computers to increase yeilds and tax the greater yeild. Also introduce more suitable crops and crops that substitute imports like tea edible oils pulses etc. Focus on deletion of assembly locally esp. In auto sector...tax aggressively traders who compete with local producers...this is how u save dollars. Tax luxury imports...at one time we had only aghas in karachi now every store is full of imported luxury items
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Maqbool Feb 16, 2023 09:39am
@bonce richard, not 40% , only 1% tax Tax and the other 1 % Rule the country, so 99% are Ruled by the Masterz ( not Friends) 1 %
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Farman Ali Feb 16, 2023 12:47pm
Can anyone tell what is the list of luxury items presented in this budget?
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Ghulam Hyder Bhatti Feb 17, 2023 09:22am
In actually, the reason of mess surrounding public sectors is the absence of patriot professionals. You just take Dar, the FM for quick referance, he is a chartered accountant as claimed, but not confirmed instead of a qualified Economist, who has to run economy of the country. CAs are hired for manipulation in tax figures not to take strategic decisions. International Lenders never trust him and so to the figures given by him; and,scolded him number of times.
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Hamdard Pakistani Feb 18, 2023 09:25am
Mar do Gharib ko.......
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