ISLAMABAD: The finance ministry Wednesday informed the National Assembly’s Standing Committee on Finance that there were 70 benchmarks agreed with the IMF under the $7 billion Extended Fund Facility (EFF), and one of them did not favour tax exemptions to any sector, including sugar.
“We are discussing the sugar issue with the IMF,” said Secretary Finance Imdad Ullah Bosal during a meeting of the committee chaired by Syed Naveed Qamar at the Parliament House.
“There are 70 benchmarks of the IMF program, and one of them says the government cannot grant tax exemptions,” said Bosal while responding to a question on the nature of the IMF objections.
He said negotiations were underway between the government and the Fund on the issue of exemption of duties and taxes on the import
of sugar.
The committee members asked whether additional revenue measures would be taken in case of tax exemption on sugar imports.
The Federal Board of Revenue (FBR) has exempted customs duty on the import of 500,000 metric tons of sugar and also reduced sales tax rate from 18 percent to 0.25 per cent and withholding tax up to 0.25 percent on the import of commodity by the Trading Corporation of Pakistan (TCP) or the private sector.
The FBR has also exempted three percent minimum value-added tax (VAT) on the import of sugar having quantity of 500,000 metric tons.
Chairman FBR Rashid Mahmood Langrial informed the committee that they had not moved any summary to the federal cabinet for exemption of duties and taxes on the import of sugar.
The federal cabinet has taken the decision on a summary moved by the Ministry of National Food Security and Research (MNFS&R).
The FBR has issued the exemption notifications after receiving the decision of the federal cabinet, Langrial stated. The FBR chairman said there were 54 percent taxes imposed on sugar, including 20 percent import duty. There should not be such a high import tariff on the commodity. The prices of sugar at one time came down to Rs130 per kg, he said.
Naveed Qamar was of the view that there was no shortage of sugar, as the country had sufficient stocks of the commodity. It was not clear what was the rationale behind the import of sugar in the presence of ample stocks.
Bosal also said that the IMF had asked the Ministry of Finance and SBP to sit together and find a way forward for financing the Pakistan Remittances Initiative (PRI) —a scheme for luring banks through incentives to increase remittances from abroad.
The panel observed that the remittances reward paid to banks and exchange companies facilitating overseas inflows through official channels was turning to be another circular debt.
Owing to the fiscal constraints, no amount has been allocated for the scheme for the current fiscal year against Rs89 billion earmarked last fiscal year, however, it crossed Rs100 billion. Even if it is paid from the SBP profit, it would mean indirect payment by the finance ministry.
The committee was informed that the reward structure — previously set between 20 to 30 Riyals per incremental transaction — has now been revised to a flat rate of 20 Riyals across all transaction sizes. The minimum eligible transaction threshold is being raised from $100 to $200.