Govt greenlights Rs40b mini-budget

Published: December 1, 2015
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Duty on imports hiked by 1%; more taxes levied to secure IMF tranche. PHOTO: FILE

Duty on imports hiked by 1%; more taxes levied to secure IMF tranche. PHOTO: FILE

ISLAMABAD: 

The federal government approved a Rs40 billion mini-budget on Monday, levying regulatory duties on hundreds of essential items and increasing customs duty on almost all imports by 1%. The move aims to secure the next tranche of the International Monetary Fund’s (IMF) three-year $6.2 billion programme approved earlier this month.

The Economic Coordination Committee approved the additional revenue measures, including an increase in customs duty on all used, imported vehicles by 10%, besides enhancing federal excise duty rates on cigarettes up to 7.5%.

Institutional shortcomings behind mini-budget

Finance Minister Ishaq Dar announced these measures while addressing a news conference on Monday. Out of the 350 items that saw up to 10% increase in regulatory duties, as many as 183 are food items, which Dar termed ‘luxury goods’, saying the consumers must pay higher prices, “if they want to eat imported yogurt and cheese”.

The most regressive measure was the 1% additional duty on five existing customs tariff slabs, which will raise an extra Rs21 billion in revenues. As a result, 2%, 5%, 10%, 15% and 20% tariff slabs rates have been increased by another 1%, partially reversing tariff reforms the government was implementing under an IMF condition.

Economists fear the mini-budget will fuel inflation, as duties have been levied on the total value of the goods which will also increase sales tax incidence. The federal excise duty (FED) rate on cigarettes for high-tier cigarette has been increased from Rs3,030 to Rs3,155 per one thousand sticks. The FED rate on low-tier cigarettes rates will go up from Rs1,320 to Rs1,420 per thousand.

The government has also increased taxes on 1300cc imported second-hand cars by one-tenth to $13,200; on 1500cc cars to $18,509; on 1600cc to $22,550; and on 1800cc to $27,900. The rates for cars over 1800cc have been increased by 10%.

After a Rs40 billion shortfall in tax collection during the July to September quarter, the IMF had given only one option to Pakistan – introduce additional taxes till November 30. The IMF is now expected to approve the 10th loan tranche of $504 million on December 15.

Pakistan agrees to slap billions in new taxes

The government used the ECC stamp to introduce the mini-budget and avoided parliament.  One of the reasons behind the shortfall in collection was setting an ‘unrealistic’ target. The consumers will now pay the price of the ill-conceived strategy through their nose.

Despite levying the additional taxes, the annual tax collection target of Rs3,104 billion remains uncertain. Although the Federal Board of Revenue posted an impressive 27% growth in revenue collection in November, the collection will still be short of the monthly target of Rs233.6 billion by at least Rs8 billion.

Dar said the ECC decided to extend the 0.3% reduced rate of withholding tax on banking transactions by tax non-filers till December 31. In the budget, the government had introduced 0.6% withholding tax to raise Rs38 billion, which it had to subsequently halve. The government has also extended the date of filing income tax returns by one month.

On a question of introducing mini-budgets in the future, Dar said the government would try not to revise its Rs3,104 billion annual target downwards.

As many as 61 items have been brought under the regulatory duty regime for the first time. The government levied 5% to 10% regulatory duties on these items including 20 food items to generate Rs4.5 billion additional revenue.

Pakistan to get another $502m IMF loan

What Dar termed luxury items are – poultry, fish, dry fruits, clothes, baby garments, tracksuits, brassieres, handkerchiefs, ties, bed linens, footwear, diapers, video games and sanitary towels. These items are already subject to 20% customs duties.

Published in The Express Tribune, December 1st, 2015.

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Reader Comments (17)

  • HG
    Dec 1, 2015 - 10:36AM

    OMG
    Mr.Dar used Tactical Nuke on poor Pakistani.Recommend

  • Atif
    Dec 1, 2015 - 11:53AM

    Despite all the new taxes, the public has still voted for PML-N. in recent Islamabad local government elections.

    Seems as a nation we are bent on destroying ourselves. Recommend

  • jojo
    Dec 1, 2015 - 12:05PM

    Its not a mini Budget its a giant burden on Poor Pakistanis who are already suffering from this government’s incompetency and inflation, they are building Metro and Disney lands just for electioneering on the expenses of poor and middle class, how on earth can you tax poor more like this.Recommend

  • Dec 1, 2015 - 1:49PM

    Yep Again more taxes and tax on tax. For example if you sell some goods and deposit the money in the bank for due date the you have to pay top up tax on that tax deposit. Its all run by IMF. I am not sure why we need middle man (Mr Dar) let the IMF directly run Pakistan economy and imposed direct taxes. We are worse then any country in sub continents and. I regret to say am glade my hard working earning is overseas from home. Under the circumstances who would like to live and deposit their capital in Pakistan. Recommend

  • Pakistani
    Dec 1, 2015 - 3:11PM

    ‘Fool me once, shame on you; fool me twice, shame on me’.Recommend

  • Adnan Siddiqi
    Dec 1, 2015 - 3:27PM

    Well, aren’t we suppose to thank Rahil Sharif for this? Everything good happening in this country like a man helping a blind cross an intersection is attributed to Rahil Sharif and his no nonsense demeanor. What about the ills then? Is he exempted from them or Rahil Sharif takes credit for all the good and Nawaz Sharif for everything bad?Recommend

  • adnans hair
    Dec 1, 2015 - 7:48PM

    @Adnan Siddiqi:
    Raheel sharif is not in charge of the economy. That’s down to Nawaz sharif and Ishaq dar, along with their most “experienced and best economic team”. Now don’t get upset if Sherk and his jokers don’t have any original ideas except increasing taxes. LOL

    Oh wait…you can always it on the dharna!Recommend

  • Hamza
    Dec 1, 2015 - 7:52PM

    They can cover the 40Bn and much more without any increased tax rates if they (1) ensure that the existing Custom Duty is paid in full by all importers. Most small and medium traders are guilty of under-invoicing while larger corporations and multinationals pay in full. (2) increase the tax net. Again, it a simple matter of corruption and poor will to implement. There are very few organizations properly declaring sales and paying proper sales tax.

    Such increases in tax incidence will burden the already overburdened to then point where some collapse. Who will pay the taxes then?Recommend

  • MA
    Dec 1, 2015 - 9:54PM

    @Adnan Siddiqi:
    following your (ill) logic, your master Shareef should then step down and and go back to wherever he came from….shouldn’t he?Recommend

  • A J Khan
    Dec 1, 2015 - 10:08PM

    Nawaz Government has taxed children in cribs by slapping taxes on Milk, on students by imposing taxes on school fee, on jobless unemployed youth by depriving them of jobs & old people by taxing medicines.
    PML N Government tax regime encompasses from crib to coffin. Recommend

  • Khalid Hassan Jaskani
    Dec 1, 2015 - 10:25PM

    Having read the mini budget story, there remains no doubt about the mis-governance of the present government. The masses are already under huge financial pressures to meet their expenditures and now again new taxes would be an over burden to maintain their households through their available means. The shortfall in tax recovery reflects poor performance of FBR which is under the control of finance ministry. Levy of new taxes not only increase the prices of identified commodities but also provide an opportunity to wholesalers to increase prices on items which are for daily use. Due to deficit in tax collection of Rs.40 Billion and to fulfill the conditions of IMF, it is unjustified to penalize the poor people of Pakistan. My question is that why our government cannot enforce proper Tax Collection System, by identifying the loop holes? Why the identified resources, e.g., Oil exploration, coal based power projects, Thermal power projects, utilization of identified gold mines, etc., are not being taken up to minimize the imports and enhancing export volumes. How long it will take it to bring stability, to eradicate corruption, and reliance on begging from foreign agencies like IMF and World Bank. Why can’t we curtail our luxurious administrative and unproductive government expenses? Metro Bus and Disney Land projects will not make Pakistan a self reliant country.
    The words of Minister of Finance are also deplorable, used for the people of Pakistan, reminding us the the attitude of Queen of France over the starving people due to World War II and not getting bread hence she advised them to eat cakes. We are expecting such a situation and response from our government too. Recommend

  • shehryar
    Dec 1, 2015 - 11:42PM

    all hawala and hundi people would be having a blast as money will be sent abroad by all the tax evaders and people already paying taxes will have to suffer. thanks alot nawaz i regret voting for you.Recommend

  • Adnoon Siddiqui
    Dec 2, 2015 - 12:32AM

    Thank you mian sahab for introducing yet another set of taxes. We are forever here to serve you and your family and will pay whatever tax you desire to make sure your business empire keep on expanding.Recommend

  • Atif
    Dec 2, 2015 - 1:43AM

    The economic policies are under tight control of Sharif families. Ishaq Dar’s son is married to Nawaz Sharif’s daughter. Raheel Sharif has nothing to do with this mini budget. Can’t understand why people people are coming up with absurd logic to defend the Sharif family..Recommend

  • Khan
    Dec 2, 2015 - 6:49AM

    The poor don’t buy imported cheese or fish or any other imported items.Recommend

  • M jamal Uddin
    Dec 2, 2015 - 11:46PM

    Democracy “Government of the people for the people by the people”?????????Recommend

  • M jamal Uddin
    Dec 3, 2015 - 12:19AM

    Government of the people for the people by the people?????????Recommend

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