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Wednesday February 21, 2024

Another mini budget on the cards

The Prime Minister Imran Khan on Saturday reviewed the performance of of some ministries and the performance of the FBR also came under discussion. With the IMF or without IMF, the government wants to give signal to the international creditors that they are serious in fixing the economic difficulties. Although, the government does not concede but there are some prior actions which Islamabad will have to undertake on the fiscal front before signing the letter of formal request for seeking bailout package from the IMF.

December 16, 2018

ISLAMABAD: In a bid to bridge the gap of the increasing revenue shortfall, the government is considering major revenue measures including raising the GST rate on POL products, slapping tax on the telecom companies, reversing the tax relief for salaried class by 50 percent and increasing the tax rate on cigarettes by reviewing the existing third tier taxation system. The jacking up of additional custom duty by 1 percent is also among the proposals floated by the FBR to achieve the revenue targets.

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

The Prime Minister Imran Khan on Saturday reviewed the performance of of some ministries and the performance of the FBR also came under discussion. With the IMF or without IMF, the government wants to give signal to the international creditors that they are serious in fixing the economic difficulties. Although, the government does not concede but there are some prior actions which Islamabad will have to undertake on the fiscal front before signing the letter of formal request for seeking 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 the first five months, the over Rs80 billion shortfall occurred due to the ill designed policies. “We faced a shortfall of Rs35 billion owing to the relief on the POL products in the first five months of the current fiscal year,” said the official sources.

Secondly the FBR is unable to collect Rs4 billion every month due to the suspension of the withholding tax on cellular mobile users by the Supreme Court of Pakistan. It caused the FBR revenue loss to tune of more than Rs16 billion so far. Now the FBR will have to find ways and means to cover the loss so new measures need to be taken to bridge this gap, added the official.

The FBR also suffered losses in the revenue collection because of the relief provided in the last budget to the salaried class by jacking up the taxable limit to Rs1.2 million in one go. While some of this relief was withdrawn in the supplementary budget, " the government is considering to reverse the incentive for the salaried class by 50 percent,” said the official sources and added these measures could help the FBR to move towards achieving its desired target.

Also the FBR is all set to review the third tier taxation system for cigarettes on the pretext that the FBR used to collect Rs114 billion from this industry three years ago, but the volume of collection tumbled and the FBR introduced a third tier after which the revenue collection could not even achieve the Rs100 billion target. The FBR has now decided to review this policy seriously and increase the tax rates for tobacco industry to reach near the collection of Rs114 billion this year.

On the import curtailment, the official sources said the FBR increased Regulatory Duty (RD) for discouraging imports but it has reached a saturation point so there is no more space for raising the RD anymore. On the eve of supplementary budget after coming into power by the PTI led regime, the FBR had proposed to jack up the additional custom duty by 1 percent to fetch Rs75 to Rs80 billion additional revenues but it later dropped the idea. “The FBR has again floated this idea to raise the additional customs 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 the first five months and FBR eyes to collect Rs4,398 billion for ongoing fiscal year. The FBR will have to collect more revenues in the remaining months and without additional measures it seems impossible even to achieve the revenues collected in the last fiscal.