Govt Proposes 5% Tax on Manufacturers

The Federal Government has proposed to increase the 5 percent tax on manufacturers to uplift the exports of the country under its new economic policy.

According to the Express Tribune, manufacturers with an annual income higher than Rs. 50 million and exports less than 10 percent of their production will have to pay 1-5 percent special income tax under the new proposal.

The newly suggested special income tax will replace the 4 percent super tax and apply to an income of Rs. 50 million instead of Rs. 150 million as per the latter.

According to sources, some industries will be facilitated with the provision of exemption from the tax through a negative list. Experts say that the government is trying to raise funds to counterbalance the Rs. 75 billion losses it is incurring while facilitating sectors with lower earnings. These include traders, bankers, stock market brokers, real estate dealers, and transporters.

Talking to the media, the Federal Minister of Finance and Revenue, Miftah Ismail, has also confirmed and endorsed the government’s proposal.

It is to be noted that under the International Monetary Fund’s (IMF) conditions, the government cannot provide tax relief to sectors, however, the government has assured IMF that relief to a specific sector would be compensated from the thriving sectors.

Sources claim that the government is considering two options to provide tax relief to these five sectors. The first method is two tax other sectors to compensate for the aforementioned five sectors, whereas the second option is to only provide relief to traders and real estate dealers in the first phase to be enforced before August 29.

Experts say that the decision to increase the tax would increase unemployment in the country and burden the manufacturing sector, which is already three times the revenue of its total share in the economy.

The PM also accepted a proposal to impose a tax on cigarettes in the range of Rs. 100 – Rs. 300.

On the other hand, the government is also considering allowing imports on payments of heavy duties. In this regard, the finance minister had suggested the PM lift the ban on the import of 860 product lines and instead impose heavy regulatory duties. However, Shehbaz Sharif has not provided approval for the proposal yet.



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