Courtesy National Assembly of Pakistan
The National Assembly on Monday passed the Finance (Supplementary) Bill, 2023, imposing additional taxes of Rs. 170 billion required to revive a stalled International Monetary Fund (IMF) program seen as key to shoring up the country’s depleting foreign exchange reserves.
In a winding up speech, Finance Minister Ishaq Dar claimed the “mini-budget” was merely a step in the government’s efforts to ensure economic stability, adding that the prime minister would announce “austerity measures” within a few days. Stressing that the government had to take “difficult decisions,” he alleged that this was primarily because of the poor policies and mismanagement of the ousted Pakistan Tehreek-e-Insaf (PTI)-led government.
Maintaining that the IMF had wanted the government to impose more than Rs. 800 billion in additional tax and non-tax measures, he claimed he and his team had convinced the lender to bring the number down to Rs. 170 billion during 10 days of discussions in Islamabad. Referring to the debate over the legislation—specifically a lawmaker’s criticism of taxing wedding receptions—Dar emphasized that such taxes were “unavoidable” when the country was going through times of difficulty.
He also voiced concern over the ever-increasing circular debt in the power sector. “Our cost of producing electricity is Rs. 3,000 billion, while we collect only Rs. 1,550 billion,” he said. “Power theft, line losses and non-payment of bills are mainly responsible for non-recovery of Rs. 1,450 billion,” he claimed.
Dar also rubbished criticism from some opposition lawmakers that the additional taxes were a result of the Federal Board of Revenue (FBR)’s failure to meet its tax collection targets, maintaining that the FBR had “completely satisfied” the IMF and its tax-collection was on track. However, he admitted, that the current wave of inflation was becoming unbearable for the general public. “Is it the result of a few months [of policies]? It is the result of the mismanagement, mis-governance and destruction of the fiscal discipline and monetary policies,” he said, reiterating claims that the PTI-led government had brought the country to this point.
In 2016-17, he said, Pakistan was the 24th largest economy of the world and “today we are at 47 position.” He further said the PTI government had failed to fulfill commitments with the IMF and sabotaged the economy before its ouster, stressing that it was a state obligation to honor agreements inked with the IMF and the incumbent government could not avoid this.
Nonetheless, he claimed, the new revenue measures would not affect the poor segments of society, as they were being facilitated through budgetary increases for the Benazir Income Support Program (BISP).
Mini-budget
Detailing the bill that was passed, Dar said the government had agreed to a recommendation of the Senate Standing Committee on Finance and withdraw the imposition of 20 percent Federal Excise Duty (FED) on air tickets for business, club or first class, or Rs. 50,000, whichever is higher. Instead, he said, FED on business class tickets for flights to South America and North America had been fixed at Rs. 250,000; luxury travel for flights to Africa and the Middle East would be taxed a fixed rate of Rs. 75,000; while business travel to Europe, Australia, New Zealand and countries in the Asia Pacific would pay FED of Rs. 150,000.
Another amendment, he said, was on the imposition of duty on cigarettes. Under the amended policy, all brands would pay a duty in accordance with what they were paying before the introduction of the supplementary bill. He also said the government was making some technical changes for imposition of tax on the shares not traded through stock exchanges.
The minister emphasized that he would make every effort to include proposals given by lawmakers in the federal budget for the next fiscal year. He hoped the country would come out of the economic quagmire and Pakistan would soon be on the path of progress.
Opposition criticism
Ahead of voting on the bill, all amendments moved by opposition members—mostly by Jamaat-e-Islami’s Maulana Abdul Akbar Chitrali and Saira Bano of the Grand Democratic Alliance—were rejected through a voice vote. Chitrali also sought to point out lack of quorum but no head count was ordered and the proceedings continued without any delays.
Amendments proposed by the opposition lawmakers had called for a reduction in the general sales tax from 18 to 16 percent; and withdrawal of proposed taxes on wedding ceremonies at marriage halls and sugary drinks.
After the voting, Speaker Raja Pervaiz Ashraf adjourned proceedings until Wednesday evening.