A National Assembly session is under way to pass a crucial tax amendment bill to fulfil the conditions of the International Monetary Fund (IMF) to revive a stalled loan programme that the country needs to stave off default.
\nFinance Minister Ishaq Dar introduced the Finance (Supplementary) Bill 2023.
\nAddressing the lower house of parliament, Dar compared the performance of the previous PML-N and PTI governments. He said that during former prime minister Nawaz Sharif\u2019s tenure, the GDP per capita increased while the Pakistan Stock Exchange\u2019s (PSX) market capitalisation was $100 billion.
\nHowever, the PSX\u2019s market capitalisation declined to $26bn during the PTI government, he said, adding that the decrease showed a lack of investor confidence in the previous government.
\nDar also criticised the PTI government for increasing the country\u2019s debts significantly.
\n\u201cIn 2017-18, GDP growth had surpassed six per cent, inflation was at 5pc, food inflation at 2pc \u2026 After the 2018 elections, a selected government came into power. Because of its failures, Pakistan\u2019s economy shrunk.\u201d
\nThe minister then moved on to the relevant amendments that he was proposing:
\nIncrease in federal excise duty on cigarettes and fizzy drinks
\nIncrease in federal excise duty on cement from Rs1.5\/ kg to Rs2\/ kg
\n\u00a0
\nGST increase from 17pc to 18pc
\nBenazir Income Support Programme (BISP) handouts increased to Rs400bn from Rs360bn
\nMeanwhile, a session of the upper house of parliament has also begun.
\nA Senate session has also started.
\nPresident \u2018refuses\u2019 ordnance
\nThe government was forced to head to parliament after President Arif Alvi \u201cadv\u00adised\u201d the finance minister to take parliament into confidence over the Rs170 billion in new taxes that are being levied.
\nSoon after the presid\u00adent\u2019s \u2018refusal\u2019, a cabinet meeting was convened to approve the tax amendment bill which would be tabled in both houses of parliament today, as per a statement issued by the PM Office after the meeting.
\nFollowing the cabinet meeting, in a later-night development, the Federal Board of Revenue (FBR) issued SRO178 to enhance a federal excise duty on locally manufactured cigarettes which would generate up to Rs60bn in taxes on tobacco products and the Finance Division issued a notification increasing the general sales tax by one per cent to 18pc. These measures would raise Rs115bn.
\nSince the government had agreed to a target of Rs170bn in new taxes with the IMF, the remaining amount of Rs55bn would be collected through an increase in excise duty on airline tickets, and sugary drinks and an increase in withholding tax rates after the Finance (Supplementary) Bill 2023 is approved by parliament today.
\nBreakdown of taxes
\nThe government agreed with the IMF to raise Rs170bn through taxes. Of this,
\nRs60bn will be generated by increasing federal excise duty on locally manufactured cigarettes
\nRs55bn by increasing the general sales tax to 18pc
\nRs55bn by increasing excise duty on airline tickets, and sugary drinks and raising withholding tax rates (following the bill\u2019s approval by parliament)
\nPakistan held 10 days of intensive talks with an IMF delegation in Islamabad \u2014 from Jan 31 to Feb 9 \u2014 but could not reach a deal.
\nThe IMF, however, said in an earlier statement that both sides have agreed to stay engaged and \u201cvirtual discussions will continue in the coming days to finalise the implementation details\u201d of the policies, including the tax measures, discussed in Islamabad.
\nThe government is in a race against time to implement the tax measures and reach an agreement with the IMF as the country\u2019s reserves have depleted to a critically low level of $2.9bn, which experts believe is enough for only 16 or 17 days of imports.
\nThe agreement with the IMF on the completion of the ninth review of a $7bn loan programme would not only lead to a disbursement of $1.2bn but also unlock inflows from friendly countries.<\/p>\n","protected":false},"excerpt":{"rendered":"
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