Govt to scrap fixed tax, waive fuel adjustment charges on power bills

Premier Shehbaz also says due to the efforts of coalition partners, danger of default has been averted

Prime Minister Shehbaz Sharif has announced scarping of fixed tax imposed on traders in the budget and also waived fuel adjustment charges (FCA) on electricity bills for millions of consumers.

“The economy was on verge of default... but now due to the efforts of coalition partners we have averted this danger,” announced PM Shehbaz while speaking in Doha on Tuesday where he is on an official two-day visit.

While admitting that imposed fixed tax was a fault, the premier said neither he wanted nor he directed the finance ministry to impose such tax on traders.

“The fixed tax was imposed against our vision... I have formed a committee to fix responsibility for this,” he added.

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“[Waiver] will create a gap of Rs42 billion tax revenue but we are not going to take any step that will create difficulties for our small traders,” he said. “Traders should not worry about this tax now. It’s been withdrawn.”

Speaking about inflated electricity bills, PM Shehbaz said fuel adjustment charges – linked to international fuel prices – witnessed an exorbitant rise due to which additional charges were imposed on the electricity bills.

“I took notice of this [inflated electricity bills] and on the instructions of [PML-N supremo] Mian Nawaz Sharif… we have decided to waive additional charges from the electricity bills of 17 million consumers out of a total 30 million,” the premier said.

He also cited hurdles in taking measures related to the economy saying the government has to consult with International Monetary Fund (IMF) before making any decision.

Also read: Electricity tariff hike triggers protests in provincial capital

President Arif Alvi on Monday promulgated a relief-loaded ordinance to appease traders, transporters and the Pakistani diplomats posted abroad but smokers were taxed to pay for the concessions given to these classes of the society.

The president signed the Tax Laws (Second Amendment) Ordinance, 2022 – a week before the IMF is set to take Pakistan’s request for completion of the two pending reviews for the release of the $1.2 billion tranche of the loan programme.

After the approval of the budget, the government has taken a hit of Rs75 billion in the shape of tax relief or sanctioning additional expenditures. But the gross revenue measures, both on account of regulatory duties on imports (Rs6 billion to Rs14 billion) and duties on cigarettes and reduced rates for traders hardly match the Rs75 billion figure.

The federal cabinet on Monday separately approved the imposition of regulatory duties up to 100% on imports.

Through the presidential ordinance, the government withdrew Rs42 billion taxes imposed on the traders but also introduced measures to recover Rs23 billion from them, resulting in net relief of around Rs19 billion to the retailers.