LAHORE: The taxes levied in the mini-budget have further tilted the tax system towards indirect taxes, a fact sheet issued by the Institute of Policy Reforms (IPR) said on Wednesday. “Is this a precursor of more mini budgets in 2015-16, like last year, and what is the strategy for raising additional resources?” asked IPR in its statement. The IPR asks to focus instead on greater austerity in expenditure, especially in non-salary heads, and /or mobilising additional revenues from direct taxes. One option was to introduce a super tax on banking companies, which were currently making record profits. A one-time levy has been introduced in the latest budget at the rate of 4 percent on banks’ income and at 3 percent on affluent individuals, AOPs and companies earning more than Rs500 million in tax year 2015. Combined with the austerity drive, the budgetary position could have been improved by Rs40 billion. The IPR further said the new taxation proposals should have been placed before the National Assembly. “Surely, the prerogative of raising taxes rests with the Parliament and not unilaterally with the Executive. Already, after March 2015, on IMF's insistence, all SROs, embodying exemptions or concessions, have to obtain legislative approval,” the IPR adds. Petroleum products were a major source of revenue from minimum duty. Following the decline in oil prices, not only have the GST rates on these products been raised substantially but also insidiously import duties were levied. For example, inclusive of a regulatory duty, the import duty on furnace oil has been increased to 8 percent and on HSD oil to 11 percent. The levy of additional regulatory duty on luxury items raises the total duty to up to 35 percent. Most of these items are likely to be smuggled, with such high rates of duty. The excise duty on cigarettes has been subjected to frequent change. These rates were enhanced in 2014-15. Now they have been increased. According to the IPR fact sheet, the government was pursuing a policy of punitive taxation to curb smoking in line with WHO’s requirement. However, what was happening was more tax evasion than a reduction in consumption. The reported production has declined by 4 percent, since June 2014. The IPR says, the HSD price in Pakistan is the highest in South Asia today. The price was 29 percent higher than in India, 46 percent higher than in Bangladesh and 28 percent higher than in Sri Lanka. This has kept the price level artificially high in Pakistan and raised the cost of living, especially for the lower income groups.
