IMF demand: The Shehbaz Sharif administration on Tuesday announced new taxing measures of Rs115 billion through a notification issued by the Federal Board of Revenue to appease the International Monetary Fund (IMF) for the resumption of the bailout program (FBR).
After President Dr. Arif Alvi refused to publish an ordinance for the unveiling of a mini-budget, the government acted quickly and secured the federal cabinet’s approval of the money bill.
Following this declaration, the cabinet convened under the leadership of PM Shehbaz Sharif, and it was decided to impose taxes totaling Rs115–116 billion through an SRO by the FBR, with the remaining taxation measures totaling Rs55 billion to be submitted through a money bill before Parliament.
The Federal Bureau of Revenue (FBR) issued the Statutory Regulatory Order (SRO) after receiving approval from the cabinet in the form of the Tax Laws Amendment Bill 2023 to raise the General Sales Tax (GST) rate from the current 17 to 18% and raise the Federal Excise Duty (FED) on cigarettes in order to raise an additional Rs115 billion out of the Rs170 billion the government agreed to as required by the IMF.
Sources revealed that the administration had also approved a 25% GST on hundreds of high-end luxury items, but it would be implemented through the Tax Amendment Bill 2023, which would be submitted in the parliament on Wednesday (today).
To increase the cost of imports, the FBR increased the GST rate on all luxury goods that were previously prohibited by the Ministry of Commerce. On some luxury goods produced domestically, an increased GST charge has also been suggested.
Due to the lender’s adamant opposition in Washington, the government has given up on imposing the Flood Levy.
Alvi decides not to issue an ordinance
The IMF’s staff-level agreement may be delayed despite taking this course of action to impose Rs115 billion in taxes immediately with effect from February 15, 2023, with the approval of the federal cabinet, as the government has called a session of the National Assembly today at 3:30 pm and a meeting of the Senate at 4:30 pm to introduce the Tax Amendment Bill 2023.
At 9:25 p.m., Finance Minister Ishaq Dar was planned to make a televised statement outlining the key components of the mini-budget, however due to a change in plans, his scheduled press conference was postponed at the last minute.
After attending the federal cabinet meeting, Dar told reporters outside the Finance Ministry that he had asked the president to publish an ordinance but that he had declined.
He recommended that a measure imposing taxes be brought to the government.
Dar advised the president that there were taxation-related concerns and that the government could not wait another 8 to 10 days because certain actions would have an impact on the economy, but the president refused to consider the proposal.
He claimed that the administration took a different approach and instructed the FBR to issue an SRO increasing the GST rate to 18% while increasing the FED on cigarettes.
The finance minister declined to provide the precise rate and suggested waiting until a formal notification to that effect was issued.
The Tax Amendment Bill 2023, which will be introduced in Parliament, would increase the FED on beverages, sugary drinks, and juices from 13 to 20%. (today).
The minister hoped that this week will see the signing of the staff-level agreement.