IMF demand’s do-more, asking for sales tax raise from 17% to 18%
International Financial Institution asked Pakistan to increase sales tax by one percent during technical negotiations
Technical talks between Pakistan and IMF completed, IMF demands increase in sales tax rate from 17 to 18 percent, IMF expresses concern over a slowdown in privatization program.
Technical negotiations with the IMF Mission of Pakistan’s Economic Team have been completed and the IMF has requested the Government of Pakistan to increase the overall sales tax rate in the country by one percent to 18 percent instead of 17 percent. In this way, an additional income of approximately 40 billion rupees will be obtained.
The sales tax should be increased by one percent in the current financial year immediately and the income tax exemption should be abolished during the same financial year. Abolition of concessional rate of sales tax in various sectors has also been considered and it is feared that concessions of sales tax worth about 110 billion rupees will be abolished in the export sector.
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A flood tax is also likely to be levied on bank profits to fund flood funds for reconstruction in flood-affected areas.
Expressing concern over the slow pace of privatisation, the IMF has demanded that the privatization of Haveli Bahadur Shah and Baluki LNG power plants be completed in the same financial year.
The Privatization Commission of Pakistan will provide the roadmap for the privatization program to the IMF in policy discussions.
In the energy sector, subsidy will continue on Kisan Package, Balochistan Tube Well Scheme. The subsidy will also be maintained for Gilgit-Baltistan and Azad Kashmir.
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It has been proposed to end the subsidy to the export sector immediately. Provinces will be free to subsidize the export sector on their own.
According to sources, the development program PSDP and non-development expenditures will be cut. FBR will ensure sustainable reforms and implementation in the energy sector.
The parties have not yet decided on the implementation of sales tax or GST on petroleum products. The government has agreed to immediately reduce the revolving debt in the power sector by up to 1000 billion.
A circular debt management plan for immediate payments of Rs 540 billion in the gas sector will be prepared and will be communicated to the IMF in the next two days.
