• Petroleum levy of Rs 5 will be levied every month up to Rs 50
• In the provisions of Rs.200bn salary, the pension set aside, to be replaced by the ‘Rainy Days’ Fund
• Tax collection target increased by Rs 422 billion; Firms will face poverty tax in different slabs
ISLAMABAD: In a breakthrough, Pakistan and the International Monetary Fund (IMF) on Tuesday night reached an understanding on the federal budget for 2022-23, with the Expanded Funds Facility (Expanded Funds) after officials committed to generate Rs 436 billion more tax. EFF) was revived. And gradually increase the petroleum levy to Rs 50 per liter.
The agreement was reached during a meeting held via video link between the IMF Staff Mission and the Pakistani Economic Team led by Finance Minister Miftah Ismail.
Acknowledging that significant progress has been made in the fiscal year 2013 budget, Esther Perez Ruiz, the IMF’s resident representative in Pakistan, pointed out dawn: “Discussions continue between IMF staff and officials on policies to strengthen macroeconomic stability in the coming year.”
The IMF mission will finalize the monetary targets with the State Bank in the next few days and, in the meantime, share the draft of the Memorandum of Economic and Financial Policy (MEFP).
The MEFP will also include some pre-actions that will be required for implementation before the IMF board approves Pakistan’s case and the subsequent disbursement of about $1 billion next month.
“We have now closed the budget in consultation with the IMF,” Finance Minister Ismail told reporters. He said that all the budget related issues have been resolved with the fund.
The IMF is also expected to issue a statement confirming substantial progress on the financial framework, agreed by both sides. Top government sources said that in order to win over the IMF mission, the Pakistani side had agreed to start charging petroleum development levy on all POL products, which was gradually increased to a maximum of Rs 50 per month from Rs 5 per month. Will go
In another comeback, the government imposed a 1 per cent poverty tax on firms earning Rs 15 crore, 2 per cent on those earning Rs 200 crore, 3 per cent on income above Rs 250 crore and 4 per cent tax on income above Rs 300 crore. Agreed to install. In the original budget, the government had set a poverty tax of 2 per cent only on those earning Rs 300 million and above.
The government also agreed to do away with provisions for additional wages and pensions, for which Rs 200 billion was set aside as block allocation. Instead, a separate allocation of contingencies was made, but this would be strictly for emergencies like floods and earthquakes so that the amount was not spent.
Pakistan has also committed to deliver a primary budget surplus of Rs 152 billion, which means that revenues will finance all expenses – apart from interest payments – and will still leave a surplus of Rs 152 billion in the national kitty.
Sources said the IMF team would now finalize the targets for net international reserves and net domestic assets, but everything was settled on the part of the agreement. Sources said the IMF team will share its draft MEFP with the government on Friday.
upward revision of tax collection target
To pacify the technical team of the International Monetary Fund (IMF), the coalition government has agreed to revise the annual tax collection target for the year 2022-23 to around Rs 422 billion by taking additional tax measures.
“We have taken concrete additional tax measures without increasing the tax burden on the poor,” said well-known sources in the finance ministry. dawn, The additional tax measures will be announced by Finance Minister Miftah Ismail in the last budget speech.
Sources said the additional measures would only affect the affluent class.
Although the coalition government in its first budget shied away from unpopular tax measures for fear of political backlash and pinned its hopes of getting maximum revenue from higher-than-expected inflation and economic growth, the lower revenue target did not go down well with the IMF, Which asked Islamabad to take additional measures to make the revenue collection target more realistic.
The Fund’s preliminary estimates that additional measures would be required were conveyed to the Finance Ministry soon after the budget was announced.
official sources told dawn A formal agreement has been reached after the FBR agreed to revise its annual collection target from Rs 7004 billion to Rs 7426 billion for the year 2022-23. Sources said this increase has cleared the way for restarting the IMF programme.
According to insiders, one of the major decisions was to increase the tax rates for higher salary earners in higher slabs. As of today, the exemption up to Rs 12 lakh will remain intact, sources said.
The finance ministry’s calculations with regard to tax measures, especially the revenue that would come from inflation, were very low. The Finance Ministry puts inflation at 11.5 per cent while the FBR estimates it at 12.8 per cent. However, as per the new estimates, the impact of high inflation on revenue collection will be much greater.
In the budget, the FBR revenue was estimated at Rs 5.818 trillion for the base year 2021-22, which will now be around Rs 6.1 trillion estimated. This correction in Aadhaar data will also help FBR achieve the revised revenue target.
Published in Dawn, June 22, 2022