The government has reportedly prepared two draft ordinances to impose Rs200 billion in new taxes, days after accepting the International Monetary Fund’s (IMF) demands to restart a stalled loan program.
The government is also considering ending the subsidy for the power industry and imposing sales taxes on raw materials used by exporters, particularly textile producers. Gas and electricity pricing increases are also planned.
The two draft ordinances prepared by the country’s top tax machinery related to the imposition of Rs100bn taxes and an Rs100bn flood levy on imports.
“We have prepared both ordinances,” a tax official was quoted as saying in Dawn, adding that there would be an increase in withholding tax rates and regulatory duty on luxury items. Besides, the massive devaluation of the rupee in the outgoing week is also expected to generate additional revenue for the Federal Board of Revenue (FBR).
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The flood levy will be used to make up for a shortfall in the petroleum development levy and will be collected by the FBR at the import stage (PDL).
The IMF anticipated that the PDL would fall short by Rs300 billion and requested that the finance minister boost the levy on gasoline and diesel from Rs35 per liter to Rs50 per liter. According to the report, this decision was anticipated in the upcoming review of petroleum prices on January 31, which might result in an increase of Rs20 to Rs40 per liter.
The IMF team is expected to reach Islamabad on Jan 31 for talks after Prime Minister Shehbaz Sharif gave assurance for implementing these policy measures, which were delayed for almost four months for political reasons as they could have fuelled already-high inflation. However, the government had to accept IMF conditions after the lender refused to budge.
