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- There will be no petroleum tax at the next review.
- The finance minister said the IMF plan was inevitable.
- He said he sympathized with the people who were burdened.
Pakistan Finance Minister Mohammad Aurangzeb said on Sunday that President Asif Ali Zardari had approved a tax-heavy budget for the next fiscal year starting July 1 and he was “very optimistic” that Pakistan would get a new bailout from the International Monetary Fund (IMF).
“The IMF program is our guarantee of macro stability. We are moving forward with the program; it is inevitable. I am very optimistic that we will be able to conclude an extended Fund program that is bigger and longer in duration,” the minister told reporters in Islamabad.
India’s federal government nearly defaulted last year and adopted a 18.9 trillion rupees budget, backed by tax increases, in an effort to secure a new bailout from the International Monetary Fund.
In the budget, the government increased taxes on the already burdened working class, brought exporters under the normal tax system, raised petroleum duty to Rs 70 and imposed new taxes on the real estate sector, among others, to boost tax revenue.
Experts say that while the financial blueprint holds promise for helping struggling countries reach a deal on the fund, they also warn that it could lead to further inflation, sparking public anger.
Talking about the burden of inflation on the people, the finance minister said: “I completely understand the pressure that people from different sections feel about the additional taxes; I totally sympathise with them but we need to work on this.”
The Finance Minister said he has a clear mind and will ensure that the government reduces the burden on common people and businesses in the coming days by curbing loopholes and improving the management system.
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In the budget, the government increased the Petroleum Development Levy (PDL) by Rs 10 per litre from Rs 60 to Rs 70, which caused concern among the public as petrol prices were already high.
But the Finance Minister stressed that this is not the case and the levy is not immediate, meaning that when petrol prices are adjusted tonight the levy will remain the same.
“Discussions on PDL are ongoing. I want to make it clear: we will not enforce the Rs 70 limit we have set (now),” Aurangzeb, a former banker, assured reporters.
“It is a ceiling. In my first budget speech, I had set it at Rs 80, which was later revised to Rs 70, and it will not be enforced; it will remain as margin,” the finance minister added.
It also approved a tax of Rs 70 on diesel, Rs 50 per litre on light diesel and kerosene, and Rs 70 per litre on high-octane petrol.
Tax measures
In this country of more than 240 million people, most jobs are in the informal sector, but only 5.2 million people filed income tax returns in 2022.
To increase tax revenue, the government has taken a number of measures, including blocking mobile phone SIM cards and restricting foreign travel for those who have not declared their income.
While the budget has been criticised for not bringing new industries under the tax net, the finance minister defended the fiscal blueprint and said new industries would be taxed.
“I repeat. When Mr Miftah (Ismail) proposed a tax on retailers in 2022, it should be implemented. We cannot have any sector that does not contribute to society and the fiscal.”
He also thanked the 42,000 new retailers who had registered as of yesterday and will start paying the tax from July.
“We will not introduce new industries, that is beyond doubt. The same is true for the real estate industry. Previously, the demand side was taxed … Now, the income of the supply side is also taxed.”
He added that non-filers should not exist. “In this particular budget, we have taken it to a punitive level so that non-filers will realise that they (have to file taxes).”
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