By Staff Reporter
ISLAMABAD: Pakistan, struggling with weak finance, withdrew a fixed tax of Rs3,000 on small traders with electricity consumption of less than 150 units per month after countrywide protests from businesses that have been ill-prepared for the change.
“We will waive the tax on small shops, consuming 100 to 150 electricity units,” Finance Minister Miftah Ismail told a news briefing.
The government imposed a fixed tax scheme on shops outside of the tax net to boost tax revenues under an International Monetary Fund deal for $7 billion bailout package.
The IMF repeatedly pressed Pakistan that it would require ambitious fiscal measures and a sustained commitment to mobilize tax revenue to ensure funds for development while reducing debt.
Ismail said manufacturers failing to export at least 10 percent of their produced goods next year will have to pay an additional 10pc tax as “the government cannot continue to run trade deficit like the $48 billion left by the previous government.”
Crictising the previous government for bringing the country to the brink of default, Ismail said the PTI government, in its four years, could not match the tax-to-GDP ratio left behind by the PML-N government in 2018.
“We had left it [tax-to-GDP ratio] at 11.3 percent and the PTI took it to 9 percent,” said Ismail, adding that despite former prime minister Imran Khan’s claim to increase tax collection, it actually reduced every year while he was in power.
He said Khan and his finance minister Shaukat Tarin ran consecutive highest ever fiscal deficits of 9.1 percent, 7.1 percent, 8.1 percent, and 9.5 percent of GDP in the past four years despite the heavy burden of indirect taxation.
Meanwhile, the Federal Board of Revenue (FBR) said it has collected net revenue of Rs458 billion in July 2022, which has exceeded the target of Rs443 billion by Rs 15 billion. This represents a growth of about 10 percent over the collection of Rs417 billion during the same period, last year.
These figures would further improve after book adjustments have been taken into account.
Likewise, the amount of refunds disbursed during July was Rs28 billion compared to Rs. 21 billion paid last year, showing an increase of 32 percent.
The significant revenue increase in July is largely the outcome of various policy and revenue measures introduced by the government in the Finance Act 2022. Unlike in the past, there is a visible focus on taxing the rich and affluent. Owing to this paradigm shift, the domestic taxes contributed 55 percent in the collection while import taxes remained 45 percent.
A growth in Income Tax is almost 31 percent which is a remarkable shift towards direct taxation. Pakistan Customs has collected Rs67 billion in July 2022 against 65 billion collected during same period last year, registering a marginal growth of 2.58 percent. However, it suffered a dip against the target fixed for July of Rs77 billion, which is due import compression policy of the government, aiming to control the outflow of dollars. Furthermore, FBR suffered from a loss of about 11 billion in sales tax against zero rating of POL products.
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