KARACHI: Adviser to Prime Minister on Finance and Revenue Shaukat Tarin on Friday revealed that the government would not increase taxes in the upcoming ‘mini budget’, but it would withdraw some tax exemptions given to various sectors.
Talking to media persons in Karachi, Tarin said as per an agreement with the International Monetary Fund (IMF), the government had agreed to generate Rs700 billion in taxes to receive the third tranche under the IMF loan programme.
“When I became the finance minister, I had said we will not increase taxes. We will not allow [the global lender] to impose more taxes on people who are already paying them,” the finance adviser added.
During the talks, the finance ministry did not agree to more taxation, Tarin said, adding that the government convinced the monetary fund to bring down the revenue target to about Rs300b.
Tarin said the IMF had asked Pakistan regarding the tax exemptions which ‘distorted’ the tax system and added that the fund’s arguments were valid on such exemptions.
“They [IMF] say, ‘you have imposed 17 percent sales tax on some sectors, zero on some and 10pc on some. Take your sales tax and give them targeted subsidies instead’,” he added.
He also questioned the gas subsidy to the fertilizer industry that amounted to Rs150 billion and said the government did not impose taxes on the sector either, questioning if the move was benefiting the farmers as well?
During the media talk, the adviser also criticised people who were making speculations about the exchange rate. According to Tarin, as per the “real exchange rate”, the Pakistani Rupee should be traded around Rs165-167 against the US dollar, but due to speculators, the rupee was undervalued by Rs10.
He also shot down rumours that the rupee will be demonetized, stressing that the government would not take any steps that will affect businesses’ confidence or create distortion in the market. “The speculators will be defeated so don’t get into this kind of speculation. Rupee will move on both sides,” he warned.