Tax on POL

When the PTI-led government agreed with the International Monitory Fund (IMF) to set an unrealistic revenue target for the FBR at Rs5.5 trillion (later revised downward a little), it was evident from the beginning that the government was indulging in some pretty heavy miscalculations. The warnings of economic experts have proven true, and in the last review with the IMF in February, the government was left with no other option but to look for ways to increase non-tax revenues. Non-tax revenue or NTR for short is the recurring income earned by the government from sources other than taxes. Though there can be other important receipts under the head of NTR such as interest receipts, dividends, and profits from public-sector companies, the government of Pakistan can hardly rely on them as most public-sector companies are already running huge losses. Be it Pakistan Steel, PIA, or the Railways, all are causing further strain to the economy.

In the absence of any governmental plans to revamp the public sector, it is now eyeing the easiest way out – keeping the burden on the people. According to reports, the government has levied more taxes on POL products that result in further reducing any benefits to the consumer. Presumably, this move by the government will extract as much as five billion rupees from the pockets of unsuspecting consumers of petroleum products. The IMF is more interested in checking the balance sheet irrespective of how you maintain it. You promise a certain level of revenue, so you must show it, no matter whatever it takes. Now to cover the FBR’s revenue shortfall, the government is depriving the people of any benefits they may get from reduced POL prices in the international market. Ideally, the benefits should all be passed on to the consumers, but now that seems unlikely.

The price of petroleum in the international market has been reduced by around 12 percent but the government has just reduced it by seven rupees a liter. If full benefits are passed on to the consumers petroleum will sell at just 100 rupees a liter, but now it is over Rs111. That means the government is still charging around ten percent more than what it should be. The petroleum levy of diesel has been increased by over seven rupees. With a total of around 25 rupees on diesel and nearly 20 rupees on petrol per liter, the levies on POL are too much for the people – who are already under financial strain for the past 20 months, with rising inflation and declining business and job opportunities. The government should take this seriously and try to reduce the burden on consumers who are already battling inflation fatigue..