Another mini budget on the cards

By Mehtab Haider
December 16, 2018

ISLAMABAD: In a bid to bridge the gap of increasing revenue shortfall, the government is considering major revenue measures including raising GST rate on POL products, slapping tax on telecom

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companies, reversing relief for salaried class by 50 percent and increasing tax rate on cigarettes by reviewing existing third tier taxation system.

The jacking up of additional custom duty by 1 percent also included among the proposals floated by the FBR but it is not yet decided whether it will be accepted by the PTI led government or not.

Federal Minister for Finance Asad Umar has been currently visiting abroad so after his return the government could take final decision on finalising additional revenue measures in order to bridge the yawning revenue shortfall within next couple of weeks. So another mini budget is on cards which the government will have to unveil before approaching the IMF with the request to seek another bailout package.

Prime Minister Imran Khan on Saturday chaired reviewing performance of remaining ministries and the performance of the FBR also came under discussion.

With the IMF or without IMF, the government wants to give signal to international creditors that they were serious to fix the economic difficulties. Although, the government does not concede but there are some prior actions which Islamabad will have to undertake on fiscal front before signing letter of formal request for seeking fresh bailout package from the IMF.

Top official sources confirmed to The News that the last IMF mission raised the issue of taking additional measures for slashing the yawning budget deficit during the current fiscal year. The FBR argued before Premier Imran Khan that out of Rs100 billion shortfall in first five months, more than Rs80 billion shortfall occurred because of policies as Rs35 billion hit in revenues caused by the government’s decision to slash down GST rate on POL products. “We faced shortfall of Rs35 billion because of relief provided on POL products in first five months of the current fiscal year,” said the official sources.

Secondly the FBR was facing revenue hit of Rs4 billion per month because of suspension of the withholding tax on cellular mobile users by the Supreme Court of Pakistan. It caused FBR revenue loss to tune of more than Rs16 billion so far. Now the FBR will have to find ways and means to cover this loss so new measures will be on cards to bridge this gap, added the official.

The FBR also faced losses in revenue collection because of relief provided in the last budget to salaried class by jacking up taxable limit to Rs1.2 million in one go and in the supplementary budget some of its portion was withdrawn but the FBR was proposing to withdraw at least 50 percent of incentives with immediate effect. “The government is considering for reversing this incentive for salaried class by 50 percent,” said the official sources and added that these measures could help the FBR to move towards achieving its desired target.

The FBR is all set to review third tier taxation system for cigarettes on the pretext that the FBR used to collect Rs114 billion from this industry three years back then it fell down and the FBR introduced third tier after which the revenue collection could not touch Rs100 billion. So the FBR has decided to review this policy seriously and increase tax rates for tobacco industry more in order to reach near to the collection of Rs114 billion this year.

On import curtailment, the official sources said that the FBR increased Regulatory Duty (RD) for discouraging imports and it had reached saturation point so there was no more space for raising the RD anymore.

On eve of supplementary budget after coming into power by the PTI led regime, the FBR proposed to jack up additional custom duty by 1 percent that could fetch Rs75 to Rs80 billion additional revenues but the government had dropped it at that occasion. “The FBR has again floated this idea to raise the additional custom duty but it is not yet known whether the government will strike it down or grant green signal to move ahead,” said the sources.

The FBR collection grew by around 5.7 percent in first five months and FBR eyes to collect Rs4398 billion for ongoing fiscal year. The FBR will have to collect more revenues in remaining months and without additional measures it seems impossible to collect the revenues what the FBR had collected even in last fiscal year.

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