Funny relief: petroleum prices cut, sales tax increased !

[Leader]

Fuel prices cut, but sales tax increased


The government announced another reduction in fuel prices on Saturday, but put a damper on the good news by imposing a further five per cent sales tax.

The levy means that the consumer will only partially enjoy the benefits of falling crude oil prices in the international market.

The new fuel prices, which go into effect on Sunday (Feb 1), will bring the price of petrol down to Rs70.29 per litre, high speed diesel to Rs80.61, kerosene to Rs61.44, light diesel oil to Rs57.94 and HOBC to Rs80.31 per litre.

PM, Dar jump the gun, announce cuts 12 hours before Ogra notification
With the imposition of an additional 5pc GST, the total amount of sales tax on all petroleum products comes to 27pc. The cut in oil prices is expected to help the government earn an additional Rs12 billion in revenue in February alone.

In January, the government was able to collect Rs16bn after imposing 5pc GST on petroleum products, above the normal GST rate of 17pc.

But in an attempt to score political points, the announcement about reduction in fuel prices came from Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar, instead of the Oil and Gas Regulatory Authority (Ogra).

The PM’s midday announcement was 12 hours ahead of schedule. The Ogra notification of the price cut is routinely issued at midnight, when it is supposed to go into effect. Announcing the price cut in the middle of the day can cause problems for gas station owners because people usually stop buying petrol on the last day before price cuts are due.

After the PM’s announcement, a confident Finance Minister Ishaq Dar convened a press briefing on Saturday to justify the imposition of additional sales tax and announced details of the cut in petroleum prices.

Justifying the additional GST levy, Mr Dar said that several countries, including India, took such measures to arrest the impact of declining oil prices on revenue collection.

A Finance Ministry official told Dawn that the government was facing a revenue shortfall because of unexpected revenue losses on crude oil, which normally yields Rs30bn to Rs35bn every year.

As per the production agreement between the government and exploration companies, revenues on crude oil priced higher than $60 on the international market are shared between the government and the companies on a 50-50 basis. But when prices fall below the $60 threshold, the government’s share goes down to zero.

To cover this loss, the official added, the government had decided to increase the GST on petroleum products.

Crude oil prices in the international market are currently at a six-year low of $45 per barrel.

The fuel price cuts come as Pakistan’s economic team, led by Finance Secretary Dr Waqar Masood Khan, is in talks with the International Monetary Fund (IMF) in Dubai.

Islamabad is briefing the IMF team on its performance in terms of economic indicators as part of efforts to secure the seventh tranche worth $550 million.

Hike in levy criticised: Leader of Opposition in the National Assembly Syed Khurshid Shah criticised the decision to increase GST and said that on one hand the government was unable to provide electricity, gas and petrol to the masses, on the other it was going around burdening people with more taxes.

He vowed to raise the issue in the upcoming session of the National Assembly scheduled to begin from Monday.

Zulqernain Tahir adds from Lahore: Talking to journalists after a ceremony at the Elite Police Training School in Bedian on Saturday, Prime Minister Nawaz Sharif said that other countries did not transfer the benefits of reduction in petroleum prices in the international market to their people, but Pakistan did.

He said that farmers and industrialists would benefit and the prices of food items and daily-use commodities would also come down.

“The provincial governments will have to ensure the reduction of commodity prices and transport fares, in accordance with the cut in petroleum prices,” he said.

In reply to a question about the recent fuel crisis, Mr Sharif said the government would act against all those responsible. “There were issues related to the Pakistan State Oil and certain vested interests were behind the crisis. We initially took action against some officials and further investigations are under way,” he said, adding that media reporting on the issue also created a panic among people, but the situation was controlled in two to three days.

“The government will have to bear a loss of Rs68bn, but it has passed on relief to people. The government will retain Rs 2.76 on petrol, Rs3.16 on HOBC, Rs2.42 on kerosene, Rs3.18 on high speed diesel and Rs 2.28 on light diesel oil,” he said.


so when there is fuel shortage, bureaucracy is to be blamed, but now ganja coming himself to announce which is not a subsidy but due to international oil pricing.

 

[ice_man]

petrol is cheap people are not paying taxes, Hence GST is still better off. to shore up money needed to pay off debt!

stop complaining and enjoy cheap oil.

 

[WishLivePak]

I explained a bit. Are Pakistanis' "self entitlement" problem ruining Pakistan's budget? With a bit of research

It's long because there is actual research.

 

[pak-marine]

appreciate the effort PM has done in reducing petrol prices a huge load of the common man .. yeh PTI walay tu keeray hi nikaltay rahain gay whilst governing KPK ..which by the way is turning into a shyt

 

[Danish saleem]

Yahi reduction agar IK karta as PM , tu PTI walay chalangay mar rahay hotay!

Masla tu yahi ha, jo acha nai lagta uss ki her cheese buri!

 

[syedali73]

Jaahil Pakistani awam does not deserve any better than this.

 

[Mythal]

Wasn't there a petrol shortage going on in Pakistan? I am not sure about the factors that caused the shortage but I am pretty sure a reduction in price will only make it worse.

 

[Bang Galore]

Good idea. Seems Pakistan is following India closely on this one. The Indian government has been increasing taxes consistently as crude prices have fallen, allowing only for a portion to be passed on to consumers. The advantage (for India) is that the revenues really help the country, fiscal deficit will be within manageable limits and the shoring up of budgetary finances is a very good thing. I'm surprised that Pakistan hasn't done more mopping up, a chance like this to shore up finances is not likely to come by again.

 

[Sugarcane]

As there is no culture of direct taxation in Pakistan, so they have to cover up revenue loss from GST because of low price by increasing percentage of taxes. That's the only way unless Pakistani adopt habit of paying taxes and elect the people with courage and will to add more people into tax base.

 

[Viper0011.]

As there is no culture of direct taxation in Pakistan, so they have to cover up revenue loss from GST because of low price by increasing percentage of taxes. That's the only way unless Pakistani adopt habit of paying taxes and elect the people with courage and will to add more people into tax base.

You have any clue as to how buying Petrol / Gas works vs. the Taxation? And the third part, I won't even comment on, is the elected "people with courage to expand the tax net".....clearly tells me its an anti-government post.

Simply, Pakistan buys Petrol and then provides subsidiary to people in multiple ways (including electricity being produced from the furnace oil). Now, when the prices of oil drop, the prices of commodities, and everything else drops too. Resulting in subsidiaries becoming a bigger issue for the government and collectively, less taxes being generated due to cheaper prices of commodities, products and services. So what do you do? You raise sales tax on Gas to collect for that missing tax upfront. The person selling Chicken for example, may be selling cheaper chicken and paying less taxes on his business due to lower oil prices, but he'll pay higher sales tax on the pump and whether he sells chicken for cheaper or not, the government has collected that lost revenue. India and many others follow a similar process. In fact, in Europe, there are heavy taxes on this. Not sure why people are complaining without knowing what is going on. As Pakistan progresses and the economy expands, you'll have more tax payers coming on board paying taxes, but still expect the taxes to go up. In the US, depending on the income bracket you are in, you could end up paying somewhere around 20% to close to 50% of your earnings towards taxes (and majority of the state have a state income tax, federal and then a sales tax on everything you buy). Pakistan is one of the very few countries with the LOWEST tax payers and the lowest tax amounts. This needs to change so the debt can be paid off and money can circulate for public welfare projects.

 

[WishLivePak]

You have any clue as to how buying Petrol / Gas works vs. the Taxation? And the third part, I won't even comment on, is the elected "people with courage to expand the tax net".....clearly tells me its an anti-government post.

Simply, Pakistan buys Petrol and then provides subsidiary to people in multiple ways (including electricity being produced from the furnace oil). Now, when the prices of oil drop, the prices of commodities, and everything else drops too. Resulting in subsidiaries becoming a bigger issue for the government and collectively, less taxes being generated due to cheaper prices of commodities, products and services. So what do you do? You raise sales tax on Gas to collect for that missing tax upfront. The person selling Chicken for example, may be selling cheaper chicken and paying less taxes on his business due to lower oil prices, but he'll pay higher sales tax on the pump and whether he sells chicken for cheaper or not, the government has collected that lost revenue. India and many others follow a similar process. In fact, in Europe, there are heavy taxes on this. Not sure why people are complaining without knowing what is going on. As Pakistan progresses and the economy expands, you'll have more tax payers coming on board paying taxes, but still expect the taxes to go up. In the US, depending on the income bracket you are in, you could end up paying somewhere around 20% to close to 50% of your earnings towards taxes (and majority of the state have a state income tax, federal and then a sales tax on everything you buy). Pakistan is one of the very few countries with the LOWEST tax payers and the lowest tax amounts. This needs to change so the debt can be paid off and money can circulate for public welfare projects.

In Canada, I think we pay some 25% on total taxes pet litre of petrol.

Oh and as income grows larger, the more tax we pay. A 100k maker gives 3k of tax to gov't. Recently, france was facing difficulties in fianace so they decided to tax 75% for people who make a million (look it up, I can't remember exact n umbers, but it was HUGE).

Pakistanis feel self entitled and think they shouldn't pay any tax and get petrol for 1 rupee a litre.

 

[Kambojaric]

Should reduce the fiscal deficit.

 

[ice_man]

sadly our government is not increasing taxes as much as they should to shore up revenue. and worse is that people in Paksitan are complaining that Paksitan governmnet should decrease petrol further and remove GST!!

We could have raised up huge amounts of money to offset our fiscal debt!! but government is short sighted and pressurized by the common man.

 

[xyxmt]

Country's budget depends on revenue from sales tax, declining oil prices will cause huge deficit in the budgeted income so govt must do something to recover that money.

 

[khawaja07]

appreciate the effort PM has done in reducing petrol prices a huge load of the common man .. yeh PTI walay tu keeray hi nikaltay rahain gay whilst governing KPK ..which by the way is turning into a shyt

PM Could've reduced more..but they need to reek in money for themselves also! PTI kay keeray nikalnay ki vaja seh hi petrol sasta hona shuru hua..you should thank PTI actually for its stout opposition on this from the start! Petrol was cheap as hell months before the govt. started doing it.