Government to introduce additional taxes of Rs. 150 billion to meet the IMF target

FBR said that their goal was to collect Rs. 150 billion through extra revenue measures.

 

In an attempt to achieve the set annual tax collection target of Rs. 5.238 trillion, the government is coming out with a mini-budget in the next two months to introduce additional taxes of Rs. 150 billion.

In June of 2019, the government presented Rs. 735 billion worth of taxes and is still facing a revenue deficit. This shortfall could increase by the end of the current month, and the under-consideration revenue should prevent this from happening.

As per the Federal Board of Revenue (FBR), the areas that will be targeted are an increase in sales tax on petroleum products, removal of some sales tax exemptions (by adding taxes on retail market prices) and an increase in the current tax rates.

The FBR said their goal was to collect Rs. 150 billion through extra revenue measures, along with a collection of windfall gains in the shape of sales tax, through an increase in gas and electricity prices from January.

Lagging behind target:

The on-going political situation could also impact the quantum and timing of the additional taxes. At a time when the government is thinking of imposing new taxes, a presidential ordinance will also be held next week in which concessions will be given to traders and foreign banks in taxes – who are bringing in money by investing in government securities.

On Tuesday, the cabinet approved a summary for the promulgation of the presidential ordinance, the second amendment to Income Tax Ordinance 2019. For traders, the minimum tax rate will be cut down to 0.5% and the tax rate for foreign bankers will be cut from 30% to 10%.

The International Monetary Fund (IMF) Resident Representative, Teresa Daban Sanchez and the chairman of FBR Shabbar Zaidi, signaled the introduction of a mini-budget. But, the timing and quantum will depend on the tax collected in December.

“The Rs5.503-trillion revenue projection was ambitious and we have another review in February,” said Sanchez while talking about IMF’s decision to reduce the FBR’s tax target to Rs5.238 trillion.

The representative was speaking at an event organized by the Sustainable Development Policy Institute.

“Other actions could also be taken,” said the IMF resident representative, without going into too much detail.

Despite the deduction, there is still a big gap between the actual collection and the set target.

What are your views on this? Share in the comments bar below.

  • Please why? “Despite the deduction, there is still a big gap between the actual collection and the set target.“ the devil is in this gap sir! Second; Keep bringing more tax payers into the fold, with “Quantum” speed!


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