ISLAMABAD: The government has decided to introduce new taxation measures worth Rs15 billion in the next few days as part of the agreement with the International Monetary Fund (IMF) to revive a loan programme.

The new measures are expected to be taken ahead of the IMF board meeting scheduled for Aug 24, which among others will approve the release of a $1.17 billion tranche for Pakistan as part of the extended fund facility (EFF).

An official source told Dawn that tax authorities have held out an assurance to the Fund to collect Rs42bn from fixed taxation of shopkeepers. The withdrawal of tax on retailers will now be collected from other taxpayers to make up for the loss.

“We have conveyed to the IMF that the tax from traders will now be around Rs27bn as announced in the budget,’ the official source said, adding that the tax authorities have proposed several areas for either increasing tax rates or imposing a fresh tax to make up the loss.

He said the government has held out an assurance to the Fund that no revenue will be compromised as agreed ahead of the staff level agreement. Pakistan and IMF have already reached the staff level agreement last month.

One of the sectors, which will be further taxed is ‘tobacco and cigarettes. “We have proposed to further increase tax rates on cigarettes”, the source said, adding this is one of the potential areas for collecting taxes from it.

The official said there was no proposal on the table to change the tax structure in the fertiliser sector. “As of today, there is no such move or proposal of tax fertiliser,” a tax official in the FBR told Dawn. The government in the budget has exempted tax on the fertiliser to benefit the agriculture sector.

IMF Resident Representative in Pakistan Esther Perez Ruiz in a statement on Aug 2 said that an increase in petroleum development levy on July 31 was Pakistan’s last prior action for the 7th and 8th reviews. The IMF board meeting is planned for late August once adequate financing assurances are confirmed, she said.

Published in Dawn, August 12th, 2022

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