Pakistan Govt proposes finance bill for Rs 170 billion in taxes to get IMF loan

Pakistan’s government is set to impose Rs 170 billion in new taxes, on almost every already taxable item in the mini-budget in an attempt to secure the IMF loan.

Federal Minister for Finance and Revenue, Ishaq Dar presented the Finance (Supplementary) Bill 2023 – also referred to as the “mini-budget” – in the National Assembly on Wednesday as the coalition government is rushing to meet the conditions set by the International Monetary Fund (IMF) and secure a loan program necessary to prevent a default.

The crucial tax amendment bill to fulfill the IMF’s conditions was first introduced in the National Assembly and then in the Senate. Both sessions were later adjourned till February 17 (Friday).

“Right now, what is direly needed is that we come together as one and formulate a roadmap for Pakistan’s economy. Again I invite everyone to sit down and adopt a single national approach towards our economy.” Dar emphasized this in his speech at the National Assembly.

News Taxes in Finance Bill

  • The GST will be raised from 17% to 18%
  • GST on luxury items will be increased from 17% to 25%
  • A federal excise duty of 20% of the airfare or Rs50,000 (whichever is higher) will be imposed on first-class and business-class air tickets.
  • Wedding halls will be subject to a 10% withholding adjustable advance tax on their bills.
  • Federal excise duty on cigarettes, aerated drinks, and sugary drinks will be increased.
  • Federal excise duty on cement will be raised from Rs1.5/kg to Rs2/kg.

Meanwhile, the Benazir Income Support Programme (BISP) budget will be increased from Rs360bn to Rs400bn.

The government was compelled to take the matter to the parliament after President Arif Alvi had “advised” the finance minister to seek parliament’s approval instead of using an ordinance to implement the newly imposed Rs170 billion in taxes.

In response to the president’s decision, a cabinet meeting was called to sanction the tax amendment bill, which was presented in both houses of parliament today, said the statement issued by the PM Office after the meeting.

Raising Rs170bn from taxes

The government agreed with the IMF to raise Rs170bn through taxes. The total amount will be broken down into the following taxes:

  • Rs60 billion in revenue will be generated by raising federal excise duty on domestically manufactured cigarettes.
  • By generating Rs55 billion in revenue from an 18% increase in the general sales tax.
  • The excise duty on airline tickets and sugary drinks will be increased, and withholding tax rates will be raised after the bill is approved by parliament, which will generate Rs55 billion in revenue.

Highlights

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