ISLAMABAD:
The government will today (Friday) consider a proposal to withdraw 16 per cent tax on sales of tractors as the powerful agricultural lobby continues to mount pressure to reverse measures introduced in March to bring this sector into the tax net.
The Economic Coordination Committee of the Cabinet - the highest economic decision making body of the country, will review the summary of the Ministry of Industries to withdraw 16 per cent sales tax on tractors, said Finance Ministry sources.
The government had levied the tax on March 15 through promulgation of an ordinance to raise money after it had fallen short of the annual collection target. In June it covered the levy through the Money bill 2012. In March the government had also slapped a tax on sale of fertilisers and pesticides.
If the government reverses the decision, it will be taken as a major setback to tax reforms, said an official of the Federal Board of Revenue. He said the FBR has opposed the move on grounds that it will send a wrong signal to the other taxpaying sectors of the economy.
Based on this move, the FBR is likely to take a hit of Rs8 billion on revenues at a time when it is targeting to collect Rs1,952 billion in taxes by end-June, 25.5 per cent higher than last year, he added.
The ECC, headed by Finance Minister Dr Abdul Hafeez Shaikh is also looking into the proposal to slap a ban on company-fitted Compressed Natural Gas kits and imports of kits and cylinders in the wake of increasing gap between demand and supply. The summary has been moved by Ministry of Petroleum and Natural Resources that is fighting to satisfy all sectors of the economy despite facing a shortage of up to 1.6 billion cubic feet of gas per day.
CNG-fitted public transport vehicles such as buses and vans are proposed to be exempted from the ban. The Ministry has sought continuation of ban on issuance of new provisional licenses of CNG stations as well.
However, the FBR has opposed a complete ban on the kits and cylinders and has come up with a proposal to make the import extremely expensive by raising taxes.
The ECC will also take up the issue of conducting energy audit of fertiliser plants to provide gas on priority basis to the most efficient plants. Under the plan, the fertiliser plants with poor production capacity will be penalised by reducing gas supplies to divert them to the more efficient plants.
An efficient fertiliser plant produces 42 tons urea by using one million cubic feet gas per day. However, some fertiliser plants in the country are producing 38 tons of urea by using the same amount of gas.
The Petroleum Ministry has proposed to provide gas to the least efficient plants at market rates instead at subsidised rates in order to encourage them to make better use of gas and ensure efficiency.
Published in The Express Tribune, December 9th, 2011.
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This is a disgrace. Since the sector pays no income tax it has to be taxed via inputs.