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Sunday, May 26, 2024

Bombardment of Rs.40 billion new taxes following approval by IMF

The government has opted to implement new policies following the approval of the IMF Board meeting.

In an attempt to revive the International Monetary Fund (IMF)’s programme, the government has passed on numerous stringent conditions onto the citizens. However, suffering is not going to end yet, the federal government is preparing to bring a mini-budget worth above Rs.40 billion to pave way towards meeting tax collection target and fulfilling the prior conditions set by the IMF for the release of two IMF tranches worth $1.17 billion.

IMF staff and the Pakistani authorities have reached a staff level agreement on policies to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF). The agreement is subject to approval by the IMF’s Executive Board. The development is expected to take place after the IMF board meeting scheduled for Aug 24.

As told by sources, government is unable to take any step regarding taxation as it may cause hurdles in the IMF’s Board approval. To avoid any objections from the fund on the taxation side, the government would not touch the taxes measures implemented under Finance Act 2022 until the IMF approves them. The Ordinance’s tax relief for traders would have repercussions for the IMF’s upcoming approval.

Thus, the government has opted to implement new policies following the approval of the IMF Board meeting.

Read more: The impact of political instability on the economic growth

Sources in the Federal Board of Revenue (FBR) shared that the government may raise FED on tobacco products and beverages through the presidential ordinance. Moreover, the government was considering raising taxes on fertilizer, sugar, and textile sectors, adding that an amendment in the finance bill would be made through a presidential ordinance before the Executive Board meeting of the IMF.

Pakistan avoided a default after the IMF announced on July 14 a staff-level agreement to extend the bailout package and boost its size to $7 billion.