In a decisive move, Prime Minister Shehbaz Sharif has dismissed the Federal Board of Revenue’s (FBR) proposal to implement a carbon tax in the forthcoming 2024-25 budget.
This rejection comes alongside the refusal to increase the standard sales tax rate, underscoring the government’s prioritization of economic stability and public welfare amidst rising inflation.
The FBR had proposed an increase in the standard sales tax rate from 18% to 19%, aimed at generating an additional revenue of Rs 40-50 billion for the fiscal year 2024-25. Another significant proposal involved imposing an 18% sales tax on petroleum products, effectively a “carbon tax” on POL products. Both measures were anticipated to bolster the revenue but were projected to have a severe inflationary impact on the general populace.
Prime Minister Shehbaz Sharif’s rejection of these proposals reflects a strategic approach to mitigate inflationary pressures. Acknowledging the immediate and widespread economic repercussions, he has directed the FBR to enhance enforcement and administrative measures. The Prime Minister has emphasized the need for alternate revenue-generating strategies, particularly focusing on untaxed or under-taxed sectors of the economy.
“The proposed increase in sales tax and the imposition of a carbon tax were scrutinized for their potential inflationary effects, which would disproportionately burden the general public,” a senior government source explained. “Prime Minister Shehbaz Sharif is committed to shielding the populace from additional financial strain.”
In lieu of these proposals, the Prime Minister has mandated the FBR to draft new strategies aimed at non-essential and luxury items. This shift in focus is designed to generate revenue without exacerbating the financial burden on essential goods and services, thereby maintaining economic stability while targeting sectors that can absorb higher taxes.
Out of the FBR’s comprehensive suite of proposed measures, which aimed to generate Rs 1,200 billion to Rs 1,300 billion, the government is expected to approve measures totaling approximately Rs 400-500 billion. This selective approval underscores a balanced approach, striving to achieve fiscal goals without triggering adverse economic consequences.
The rejection of the carbon tax and the increased sales tax highlights the government’s delicate balancing act between revenue generation and economic stability. As the 2024-25 budget approaches finalization, the emphasis on equitable tax measures and targeted revenue strategies will be pivotal in navigating Pakistan’s economic landscape amidst global inflationary trends.
This budgetary decision signifies a clear directive: economic growth must not come at the expense of public welfare. Prime Minister Shehbaz Sharif’s administration continues to seek avenues that foster both fiscal responsibility and economic resilience, ensuring sustainable development while safeguarding the interests of the nation’s citizens.