It seems that the government’s tax fever is not going down any time soon. And how can it be? Until the International Monetary Fund (IMF) gives its nod and releases the much-needed tranche, the government will continue taxing its people.
After the tax notification on Feb 14 and March 1, the government has now imposed sales tax. However, if the IMF does not have a change of mind once again, it would be the last set of taxes.
These measures are being taken under the Finance (Supplementary) Bill 2023 to generate an additional Rs170 billion in the next four and a half months to fulfill the conditions agreed upon with the IMF to unlock a $1.2 billion instalment.
The latest tax was enforced by the Federal Board of Revenue (FBR) through a statutory regulatory order (SRO297 of 2023), under which sales tax on luxury items has been raised from 17 per cent to 25 per cent.
This 25 per cent tax will be applicable on imported food items, including confectionery, jams and jelly, fish and frozen fish, sauces, ketchup, fruits and dry fruits, preserved fruits, cornflakes, frozen meat, juices, pasta, aerated water, ice cream and chocolates.
Besides, the tax will also be imposed on vehicles in completely built-up unit (CBU) conditions, sanitary and bathroom wares, home appliances, cosmetics, crockery, pet food, private weapons and ammunition, shoes, chandeliers and lighting, headphones and loudspeakers, doors and window frames, travelling bags and suitcases, sanitary ware, tissue paper, furniture, shampoos, luxury mattresses and sleeping bags, bathroom ware, toiletries, heaters, blowers, sunglasses, kitchenware, cigarettes, shaving goods, luxury leather apparel, musical instruments, saloon items and decoration/ornamental articles.
Earlier, on Feb 14, federal excise duty on cigarettes and general sales tax were raised from 17 to 18 per cent.
Finance Minister Ishaq Dar had announced in a press conference sometime back that talks with the IMF were in the final stages and all conditions had been fulfilled. He had said that a staff-level agreement would be signed within a week. This raised the confidence level of the investors, with the stock exchange seeing a bullish trend. The rupee also appreciated against the dollar.
However, this did not last long as the delay in the deal with the Fund has put a strain on the rupee, which depreciated by Rs3.38 in the interbank market.
As per data shared by the Exchange Companies Association of Pakistan (ECAP), the rupee was being traded at around Rs282 from its earlier value of Rs279.14.
From Finance Minister Dar’s latest address at a seminar, it seems the IMF needs further assurance.
He has once again expressed his commitment to complete the $7bn Extended Fund Facility programme with the IMF.
The government has taken all steps it could, even compromising on its vote bank to keep the foreign reserves healthy.
The ball is in the IMF’s court now.