ISLAMABAD: In order to overcome the impasse in securing a loan program from the International Monetary Fund (IMF), Pakistan has imposed an additional tax burden of Rs215 billion on its citizens.
Finance Minister Ishaq Dar expressed confidence that the ongoing ninth review with the IMF, under the extended fund facility (EFF), would soon be concluded. During discussions on the budget for 2023-24 in the National Assembly, he acknowledged Pakistan’s full compliance with prior actions, but highlighted the inability to materialize due to a shortfall in external financing.
To address this issue, Prime Minister Shehbaz Sharif engaged in two meetings with the Managing Director of the IMF in Paris. It was agreed that both parties would make a final effort to complete the pending review. Over the past three days, consultations have taken place, resulting in the agreement to implement additional taxation measures amounting to 215 billion rupees. The Finance Minister clarified that these measures would not burden the poor population. Additionally, current expenditures would be reduced by 85 billion rupees, without affecting the annual development plan, as well as salaries and pensions of government employees. The IMF has approved of this approach.
Emphasizing transparency, Ishaq Dar stated that the details of the meetings with the IMF would be shared with the public, and once an agreement is reached, it will be uploaded to the finance ministry’s website. As a result of the understanding with the IMF, the annual tax collection target of the Federal Board of Revenue (FBR) will be raised from 9200 billion rupees to 9415 billion rupees. The total budget outlay will now be 14480 billion rupees, and these measures are expected to contribute to reducing the fiscal deficit.
Recognizing the unsustainable nature of the expanding pension budget, the Finance Minister announced a series of pension reforms, including the establishment of a Pension Fund, with rules and regulations currently being developed. Furthermore, multiple pensions for officers of grade 17 and above will be abolished, and retired officers will receive only one pension. In the event of a pensioner’s death, their spouse and dependents will receive the pension for up to 10 years. If reemployed after retirement, the officer may choose between the pension or salary. These difficult decisions are deemed necessary to steer the country in the right direction.
Addressing essential commodity availability, the government will continue to provide reduced-rate essential commodities to the public through the Utility Stores Corporation. An allocation of 35 billion rupees has been made, including five billion rupees for the Ramazan Package and 30 billion rupees for the Prime Minister’s Relief Package. The allocation for the Benazir Income Support Programme is also being revised upward to 466 billion rupees.
Acknowledging the services and sacrifices of the armed forces in defense of the country, Ishaq Dar assured the timely release of sufficient funds to them as outlined in the budget. To tackle climate change and food security issues, 30 billion rupees have been reserved, with 30 billion rupees earmarked for the solarization of agri tube-wells and 31 billion rupees dedicated to youth-related initiatives.
The limit of investment on pensioners’ benefit accounts under the National Savings Scheme will be increased from five million rupees to 7.5 million rupees, while the authority of the Federal Government on Petroleum Development Levy will be restricted to 60 rupees.
Recognizing the contribution of overseas Pakistanis, an allocation of 80 billion rupees has been made to facilitate their remittances, including a prize scheme. Additionally, 90 billion rupees have been set aside for various schemes under the Sustainable Development Goals.
Ishaq Dar reiterated that the super tax introduced last year would be maintained for the upcoming fiscal year. He highlighted that efforts had been made to make it progressive by eliminating discrimination and adding more slabs to it. Regarding the 0.6 percent cash withdrawal tax for non-filers, he emphasized the importance of documenting the country’s economy and enhancing the tax-to-GDP ratio.
The Finance Minister clarified that the tax on bonus shares and cash dividends would be borne by the shareholders themselves, rather than the companies. He specified that the tax rate for dividends is set at 15 percent, while it is 10 percent for bonus shares. Ishaq Dar emphasized that the windfall gain tax is not targeted at any particular company or individual. This tax, which will come into effect in 2021, is a common practice in many countries and aims to add value to the economic system.
In regards to the tax imposed on manufacturers of inefficient fans, the Finance Minister announced a six-month grace period for them to upgrade their technology and produce more energy-efficient fans. Starting from January, a tax of 2000 rupees will be enforced on manufacturers who fail to comply.
Highlighting the large number of pending tax cases worth 3.2 trillion rupees in the courts, Ishaq Dar emphasized the need to strengthen the Alternate Dispute Resolution System. To address this issue, a three-member committee led by a retired judge from a High Court or the Supreme Court will be established to resolve tax-related matters. He clarified that while the committee’s decision will not be binding on individual taxpayers, it will carry weight for the Federal Board of Revenue (FBR).
Ishaq Dar confirmed that the government would continue to follow austerity measures in the next fiscal year as well. Furthermore, he announced the withdrawal of import restrictions to address the challenges faced by the business community. These restrictions were initially imposed last year to ensure the payment of external liabilities. The government’s focus will now shift towards enhancing the country’s foreign exchange reserves.
The demands for grants pertaining to various ministries and their attached departments for the upcoming fiscal year were approved by the National Assembly. Finance Minister Ishaq Dar presented these demands for grants. The opposition’s cut motions against the Cabinet Division and the Ministries of Communications, Energy, Information and Broadcasting, Interior, and Narcotics Control were rejected by the house.
Addressing the cut motions related to the Information and Broadcasting Division, Ishaq Dar refuted the claim that salaries had not been paid to Radio Pakistan employees for several months. He informed the house that a supplementary grant had recently been approved by the Economic Coordination Committee to ensure the payment of salaries.
The Finance Minister also mentioned that the government is devising a mechanism to support young filmmakers. The next session of the house will convene on Sunday at 10:30 am.
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