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New tax will cause unemployment!

In response to another suggestion to raise the federal excise duty on cigarettes by Rs100 to Rs300 per thousand cigarettes, the PM issued a directive to increase the tax.

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In order to provide relief of billions of rupees to the traders, bankers, brokers and real estate players, it is likely that the government may impose 5 percent special income tax on manufacturers to create fiscal space.

Reaction of manufacturers on the imposition of tax would ultimately lead to business closures which would add to the unemployment in the country. Apprehensions about unemployment are also shared on social media.

According to the sources, Prime Minister Shahbaz Sharif on Wednesday did not vet a proposal to slap regulatory duties on 860 product lines in return for permitting their import and also create revenue to pay for tax waivers for five influential sectors.

Read more: Exploring the effectiveness of super tax

It was revealed that the proposal is still pending with the PM and meeting is to be held to urge him to lift the ban on imports in return for levying duties.

In response to another suggestion to raise the federal excise duty on cigarettes by Rs100 to Rs300 per thousand cigarettes, the PM issued a directive to increase the tax.

Even after holding several meetings, mini budget is still not finalized, and the government was advising to charge a 1 to 5 percent special income tax on manufacturers who earned Rs50 million or more per year but exported less than 10 percent of their output.

The special income tax would replace up to 4 percent super tax, however its application will begin at Rs50 million in income rather than Rs150 million in super tax. According to sources, certain industries would be excluded from the new tax via a negative list.

The aim behind special income tax is to produce revenue to compensate the government for the losses incurred in order to please the wealthy parts of society.

However, it may inhibit further industrialization in Pakistan. Manufacturing is already heavily taxed, paying three times higher than its share in the economy’s size.

To compensate for the tax breaks planned for traders, bankers, stock market brokers, real estate dealers, and transporters, the government would affect the industrial sector, which is the second largest employment creator after agriculture.

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