close
Thursday March 28, 2024

More taxes

By our correspondents
December 01, 2015
There have been many tall claims made by the government on the country’s economic recovery, but all these claims fall flat in the face of hard facts. These hard facts include the fact that the FBR missed its tax collection target by a staggering Rs40 billion before Finance Minister Ishaq Dar’s review meeting with the IMF this month. Speaking after the IMF review, Dar had promised there were going to be no new taxes for the public. No one believed him. And this speculation was confirmed on Monday when the Economic Coordination Committee of the cabinet met to approve around Rs40 billion worth of new taxation proposals. The finance minister himself had admitted in the week leading up to the meeting that a new ‘mini-budget’ was set to be imposed. The government’s much documented failure of direct taxation has meant that revenue targets are always met by imposing indirect taxes. Addressing the media after Monday’s meeting, Dar confirmed that the same formula had been implemented. The government has decided to increase the import duty by 10 percent on more on 313 items it deemed to be ‘luxury goods’. The list ranges from cheese and butter to shampoos, air conditioners and imported cars. An additional one percent customs duty has been imposed on all imports.
The only good news is that these taxes mean that the government has not increased the price of petroleum products further. The announcement of this mini-budget proves that the government is in a desperate situation. Despite Dar maintaining the line last week that the PML-N government had ‘saved the country from bankruptcy’, ad-hoc taxation remains critical to its strategy to ensuring our financial stability. It has become clear that the IMF was promised that Rs40 billion would be collected through tax measures before November 30. The ECC meeting had been postponed from Friday to Monday to avoid damage to the PML-N in the local bodies election. Dar seems to see the increased duties as a positive step. The stated aim is to raise new taxes and reduce imports. The government had previously noted that it hoped imports would go down due to low commodity prices. However, imports had actually increased due to low prices. The result is this mini-budget only five months after Budget 2015-16 was announced. The new full budget will also be announced in about six months. This means that the government completely failed to come up with a reasonable budget in June. An amnesty scheme being prepared for traders to bring them into the tax net after much wrangling over the withholding tax offers further proof of the government’s empty rhetoric. The new taxes in the middle of the financial year confirm once again how out of depth the government is on the financial management of the country. More bad news will probably follow in the months to come.