Rs170b mini-budget on the cards

[HAIDER]

Rs170b mini-budget on the cards​

Dar says IMF shares MEFP with govt

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Shahbaz RanaFebruary 11, 2023

photo: file

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ISLAMABAD:
Pakistan has agreed to impose new taxes to recover an additional Rs170 billion revenue, including through 1% increase in the General Sales Tax (GST) rate, in just four months.
This would in addition to withdrawal of unbudgeted power subsidies for farmers as well as exporters to meet the conditions of the International Monetary Fund (IMF) for the revival of its stalled loan programme.
The yearly impact of the new tax measures would be more than Rs500 billion. The government has also assured the IMF of raising gas tariff and petroleum levy rates to chase a much-delayed staff level agreement.
The details of the prior actions were shared by Finance Minister Ishaq Dar on Friday -- an hour after the IMF also released its press statement on the conclusion of its visit to Pakistan.
The IMF statement indicated that Pakistan would have to take all the needed measures before a staff-level agreement could be reached.
“Pakistan has agreed to implement the prior actions, which include imposing taxes amounting to Rs170 billion,” said the finance minister.
He added that the government had tried its best that the common man was not overburdened by the measures.
To a question, the minister replied that increasing the GST rate to 18% was part of the taxes -- a measure that was highly inflationary and would hurt poor people more than the rich.
Responding to another question, Dar said the Rs170 billion taxes would be collected during the remainder period of the current fiscal year.
The minister’s statement suggests that the annual impact of the new tax measures would be much more than Rs500 billion -- a figure that was closer to the IMF’s original demand.
The finance minister insisted that the Rs170 billion measures could not be conceived as Rs500 billion but he agreed that they were not the one-off taxes that would be withdrawn in June.
To impose the taxes, the government would introduce a finance bill or ordinance, depending on the situation at the time, he added.
The minister said it had been agreed to minimise the untargeted subsidies in the gas and energy sectors and this process would be completed with the approval of the federal cabinet.
Dar added that the IMF had allowed adding some amount of money in circular debt.
On Friday, the Economic Coordination Committee (ECC) of the cabinet approved withdrawing the electricity subsidies for exporters and farmers.
Talking about the electricity prices, Dar said the country’s generation cost was around Rs2.9 trillion while only Rs1.8 trillion was recovered. He added that this resulted in an increase in either the circular debt or fiscal deficit.
However, the entire difference in amount would not be recovered by increasing the tariff, he maintained.
The finance minister said Pakistan would end the Rs260 billion to Rs270 billion annual flow of the gas sector’s circular debt.
However, he added that the resolution of the Rs1.642 trillion stock of the gas sector was not part of the IMF deal. “The negotiations were hard but we agreed only to what was doable,” he claimed.
The minister did not speak about the policy rate increase but sources said that the IMF was looking for a significant increase in that area in light of the projected 29% inflation rate for the current fiscal year.
Dar said the government had received the Memorandum of Economic and Financial Policies (MEFP) from the IMF related to the completion of the ninth review of the $6.5 billion loan programme.
The IMF mission left Pakistan without reaching a staff-level agreement, indicating serious problems in negotiations that kept at least one end open despite a 10-day long visit.
The IMF and the government held talks between January 31 and February 9.
However, Dar insisted in his news conference that there was no confusion.
“We insisted that the IMF delegation give us the MEFP before leaving so we could look at it over the weekend,” he said, adding that the government and global lender officials would hold a virtual meeting in this connection on Monday.
“I am confirming that the MEFP draft has been received by us at 9am today,” he claimed.
“We will completely go through the [MEFP] over the weekend and will hold a virtual meeting with [IMF officials]. It will obviously take a few days,” he added.
Nathan Porter, the IMF mission chief in his concluding statement, said considerable progress was made on policy measures to address domestic and external imbalances during the visit.
Porter underlined key priorities that included strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies.
The mission chief once again emphasised the need for leaving the exchange rate on the market forces.
He said Pakistan should allow the exchange rate to be determined by the market to gradually eliminate the foreign exchange shortage.
The finance minister acknowledged that reforms in certain sectors required by the IMF were in Pakistan’s interest.
He criticised the previous PTI-led government for “economic destruction and bad governance”.
“It is necessary to fix those things,” he maintained.
“These reforms are painful but necessary,” he added.
Dar vowed to keep making efforts to ensure Pakistan completed the IMF programme.
The finance minister said the country would receive a $1.2 billion tranche after the approval of the review by the IMF board.
In response to a question, he replied that the finance team was “satisfied” with the negotiations with the IMF related to the power tariff.
To another query, the minister said commitments with friendly countries would be fulfilled and inflows would be received.
“There is nothing to worry about. This country has also survived on $414 million in foreign reserves,” he added.
Dar said the central bank was managing the foreign exchange reserves.
The minister claimed there was a credibility gap as the IMF did not trust the government because of the PTI government’s actions.
“They say not only did the previous government not implement the agreement but also reversed [these actions] when a vote of no-confidence was brought against [PTI chairman and deposed premier] Imran Khan,” he maintained.
In the statement, Porter said the IMF team welcomed the prime minister’s commitment to implement policies needed to safeguard macroeconomic stability.
“The timely and decisive implementation of these policies along with resolute financial support from official partners is critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” he added.
Porter said that virtual discussions would be held in the coming days to finalise the implementation of these policies.

 

[Riz]

DHA is in safe hands , baki sab log jao bhad ma

 

[teX]

WTH

Air tickets: new rates of FED fixed

According to the new rates, the FED would be applicable on club, business and first-class air tickets issued on or after the date of commencement of the Finance (Supplementary) Bill 2023

www.brecorder.com

Kanjer insano ne aik aur karwai dal de overseas k sath b

https://twitter.com/x/status/1627886746078699520

Hope they and their ulads rot bad in this world

 

[maithil]

Mini-budget fails to help narrow tax shortfall

Despite enforcing a mini-budget and steep currency devaluation, the Federal Board of Revenue (FBR) could not narrow down the tax shortfall that came in at around Rs212 billion in the first eight months of current fiscal year, though there was an ‘unusual’ spike in collection on the last day.

The FBR could not even touch the Rs4.5-trillion mark for the July-February period of current fiscal year, facing a gigantic task of collecting Rs3.2 trillion in the remaining four months.

After the imposition of mini-budget, the new annual tax target is Rs7.640 trillion, up by Rs170 billion. The FBR was supposed to adjust its monthly target too, but it was not revised upwards.

It did not change the old monthly target of Rs527 billion despite a massive increase in federal excise duty and 1% increase in general sales tax (GST).

Yet, it had to resort to taking advances from banks to meet the monthly goal, according to sources.

Pakistan had assured the International Monetary Fund (IMF) that currency devaluation would help collect an additional Rs180 billion in the current fiscal year, but February numbers may put the country under some additional IMF pressure.

The FBR managed to collect Rs4.49 trillion in taxes in July-February FY23, falling short of the target by Rs212 billion, according to FBR officials.


It had assured the IMF that it would recover the shortfall during the remaining period of current fiscal year. But it did not happen in February despite some collection on account of super tax on the instruction of Supreme Court.

During the eight months, the FBR collected Rs4.49 trillion on average daily rate of Rs18.7 billion. The collection increased by Rs671 billion, higher by 18% but lower than the prevailing inflation.

To collect another Rs3.15 trillion from March to June, the FBR needs to enhance the average daily collection to Rs26 billion.

There was an unusual collection of Rs68 billion on the last day of the month, a figure that was 128% more than the same day of last year. Highly placed sources told The Express Tribune that advances were obtained from banks in Lahore and Karachi.

Karachi Large Taxpayer Office chief commissioner did not reply when asked whether he took huge advances to bridge the shortfall.

Income tax collection on the last day was Rs39.9 billion, which was unparalleled, thus deepening suspicion of resorting to the old habit of taking advances.

FBR’s former chairman Dr Ashfaq Ahmad had discontinued the illegal practice of taking advances.

An official at the FBR headquarters said that the lowest advance tax was received from banks in February. He said that one reason behind the unusual spike could be that the entire effort for bridging the shortfall was made on the last day.

Read more Govt seeks swift credit line

The Large Taxpayer Office Islamabad also made recoveries against demand, which too contributed to the increase in daily collection of income tax.

The FBR is expected to give a company-wise breakdown of Rs40 billion income tax collection to clear the suspicion.

The overall collection of customs duty remained below target for the eighth consecutive month. The FBR collected Rs626 billion in customs duty, which was Rs101 billion lower than the target.

Income tax collection in eight months amounted to Rs1.96 trillion, up by Rs629 billion, or 47%. The collection exceeded the target by Rs47 billion while it has to be explained in the light of advances.

In February, the FBR collected Rs212 billion in income tax, exceeding the target by Rs34 billion, helped by the higher value of dollar.

Besides, sales tax collection amounted to Rs1.7 trillion in eight months, Rs138 billion less than the target. In a major failure, the FBR was not able to reap the benefit of 28-30% inflation.

The eight-month collection was mere Rs26 billion more than the last fiscal year, putting a serious question mark over the efficiency of the revenue board.

In February, the FBR pooled Rs213 billion in sales taxes, missing the target by Rs15 billion despite increase in the GST rate.

Federal excise duty collection stood at Rs216 billion, missing the target by Rs23 billion despite increase in the FED rate on cigarettes and beverages. The collection was higher by Rs19 billion, compared with the revenues received in the same period of last fiscal year.