Govt Imposes Nominal Taxes on Traders’ Electricity Bills

After the revocation of recent taxes on traders, the government has again introduced fixed sales taxes for traders on electricity bills ranging from 5 to 7.5 percent under a new ordinance signed by the president on Monday.

According to the ordinance, the traders with an electricity bill of less than Rs. 20,000 will be taxed 5 percent whereas the traders and retailers with a greater bill amount will pay 7.5 percent in sales tax. The government is targeting a tax collection of Rs. 27 billion through the sales tax on traders in its newly announced “mini-budget”.

It is pertinent to mention that traders had recently rejected the additional taxes of Rs. 3000 to Rs. 6000 and pressurizing the government to revoke the taxes. Different trade organizations held protests throughout the country including Pakistan’s economic hub, Karachi. They said that the imposition of taxes was unjust and illegal and threatened the government with submission.

Regarding the revocation of taxes, Federal Minister of Finance and Revenue, Miftah Ismail had said that the government had made a major mistake while imposing the taxes as many small traders and retailers were being affected. After numerous meetings with different trade associations, Miftah managed to calm down the angry protesters and cancelled the taxes which had been imposed through electricity bills.

Nevertheless, the government has introduced a new sales tax through the Tax Laws (Second Amendment) Ordinance, 2022 with the approval of the president of Pakistan, Dr. Arif Alvi. With the approval of the ordinance, the government is aiming to secure the $1.17 billion tranche from the International Monetary Fund (IMF) allowing external funding to continue in the country from different international financial institutions, including the World Bank (WB) and the Asian Development Bank (ADB). IMF’s Executive board will make its final decision on the programme during its meeting scheduled on 29 August.