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Finance Bill 2023 - slew of additional taxes pushes the masses to the wall

Finance Bill 2023 - slew of additional taxes pushes the masses to the wall

Pakistan

Ishaq Dar presents Finance Supplementary Bill, 2023 to secure IMF loan

ISLAMABAD (Dunya News) – In order to secure the much-needed deal with the International Monetary Fund (IMF), Minister for Finance Ishaq Dar presented the Finance Supplementary Bill 2023 in the lower house. 

The bill was presented in the National Assembly session in order to fulfill the conditions of the international lender to secure the much-needed loan programme that would help the country stave off default.

Under the budget proposals, General Sales Tax (GST) on luxury items will be increased from 17% to 25% and Federal Excise Duty (FED) on business and first-class air tickets will also be increased to Rs20,000 or 50% — whichever is higher. The finance minister also proposed imposing 10% withholding adjustable advance income tax on bills of wedding functions, and an increase in FED on cigarettes, soft and sugary drinks.

The FED on cement will be raised from Rs1.5/kg to Rs2/kg and an increase in GST from standard 17% to 18% was also proposed in the Finance Supplementary Bill 2023, while GST will not be imposed on essential goods including wheat, rice, milk, pulses, vegetables, fruits, fish, eggs and meat.

Under the Finance Supplementary Bill 2023, Mr Dar said that the government had suggested a Rs40 billion increase in the budget of the Benazir Income Support Programme (BISP) to protect downtrodden segments of the society from the impact of increasing inflation.

“The government has proposed to increase the BISP budget from Rs360 billion to Rs400, allocating Rs40 billion addition funds to benefit the (BISP) beneficiaries,” he said while presenting the Finance (Supplementary) Bill-2023 in Lower House of the Parliament.

He said the additional revenue measures, announced today, have nothing to do with the fiscal performance of the government.

Referring to the longstanding issue of Circular Debt in the power sector, Ishaq Dar said it was increased from 1,148 billion rupees to 2,467 billion rupees in a span of four years during the PTI government.

He said the circular debt was estimated to increase by 855 billion rupees this year, but as a result of incumbent government's reforms measures, it will be brought down to 336 billion rupees.

Emphasising the need for energy reforms, he said the country cannot afford 1400 billion rupees losses in the Power Sector per annum.

The Finance Minister said the government has also envisaged structural reforms to bring improvement in the economy. He said the economy is expected to grow by four percent next year.

The Minister said we are also pursuing a programme to bring down fiscal and current account deficits. He pointed out that the State Bank of Pakistan has issued a priority list for the import of food items, pharmaceuticals and raw material for the export industry.

President’s refusal

On Tuesday, President Arif Alvi held a meeting with Finance Minister Ishaq Dar in which the latter briefed the head of the state on the ongoing dialogue with the International Monetary Fund. The president appreciated the efforts of the government regarding a probable deal with the IMF while mentioning the state would abide by the promises made by the world’s financial body. 

The minister added the government wanted to impose new taxes through the ordinance. The president refused the request of the government. Dr Alvi asked the finance czar to take parliament into confidence regarding the budgetary recommendations. He asked Mr Dar to immediately summon a parliamentary session to pass a bill at the earliest.

The mini-budget is being introduced as per the directions of the International Monetary Fund (IMF) which wants Pakistan to increase its revenue and broaden the tax net. To meet yet another demand of the IMF , the government on Feb 13 had already increased prices of gas and electricity thus, putting an extra burden on the masses. 

Pak-IMF talks resume

On the other hand, Pakistan and the International Monetary Fund (IMF) have resumed their talks over the release of the ninth tranche of the Extended Fund Facility (EFF).

The federal government hopes that these virtual discussions will lead to a deal that eases up ever-increasing pressure on the country’s ailing economy. Finance Secretary Hamed Yaqoob Sheikh said the “duration (of the talks) cannot be confirmed but we intend to wrap these up at the soonest”. Islamabad held 10 days of intensive talks with an IMF delegation - from Jan 31 to Feb 9 - but could not reach a deal.

The IMF, however, said in an earlier statement that both sides had agreed to stay engaged and “virtual discussions will continue in the coming days to finalise the implementation details” of the policies discussed in Islamabad.

Talks between the International Monetary Fund and Pakistan were to be resumed virtually as the two sides look to reach a deal to unlock funding critical to keep the cash-strapped south Asian country afloat.

A Pakistani official told the internarional wire service on Monday that the two sides could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

“Duration (of the talks) cannot be confirmed but we intend to wrap these up at the soonest,” Finance Secretary Hamed Yaqoob Sheikh told Reuters in a text message, confirming that talks were resuming on Monday.

Talks centre around reaching an agreement on a reforms agenda under the country’s $6.5 bailout programme, which it entered in 2019. An agreement on the ninth review of the programme would release over $1.1 billion.

IMF statement

On Friday, the IMF had issued a short four-paragraph statement at the conclusion of its mission’s 10-day visit to Islamabad, stressing that “timely and decisive implementation of policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability”. It added that virtual discussions would continue to finalise the implementation details of policies, implying that an agreement to revive the programme through a staff-level agreement may still take some time as Pakistan moves to execute the prior actions. 

“The IMF team welcomes the Prime Minister’s commitment to implement policies needed to safeguard macroeconomic stability and thanks the authorities for the constructive discussions,” the mission chief’s, Nathan Porter, was quoted as saying in the statement.

“Considerable progress was made during the mission on policy measures to address domestic and external imbalances.

“Key priorities include strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies, while scaling up social protection to help the most vulnerable and those affected by the floods; allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector.

“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.”

 




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