The federal government is considering providing Rs60 billion in tax relief to bankers, stock market brokers, and dealers in an effort to appease the International Monetary Fund (IMF) by levying comparable taxes on other sectors to maintain the loan program.
The government disclosed its intentions to give relief to the powerful sectors the day the global lender shared a draft of the letter of intent, a document signed by the finance minister and the governor of the State Bank.
The Finance ministry was currently reviewing the draft and prior to signing, it would open the way for calling the board meeting, which is likely to be held on August 29. Pakistan has also pledged to the global lenders that it will create a primary budget surplus of Rs153 billion, in the current fiscal year to meet the goals of the IMF’s program.
According to media reports the government planned to make a significant hole of roughly Rs230 billion, including Rs60 billion that it wanted to give away in tax relief, while still trying to persuade the IMF of its intentions to execute fiscally responsible policies.
Reports further said that the IMF officials had expressed deep worries about providing tax relief to certain industries during their meeting with Pakistan but Miftah Ismail guaranteed the IMF that the relief would be “tax neutral.”
The Utility Stores Corporation (USC) has a pending subsidy request for Rs54 billion to pay for the subsidized food from the cabinet’s Economic Coordination Committee (ECC).
The ECC has already authorized an Rs30 billion additional budget for the Pakistan State Oil (PSO) subsidy.
The government is also preparing to give tax relief of billions of rupees to these sectors through possibly a presidential ordinance.
According to the media reports, the government is aiming to lower its tax rates on profits produced by lending loans to the Centre, thus the banks might gain at least Rs. 10 to Rs. 12 billion in income tax relief.
They stated that Prime Minister Shehbaz Sharif has not yet given his approval for the stock market to receive assistance.