The International Monetary Fund (IMF) wants Pakistan to apply the same rate of excise on both local and foreign cigarettes.
High-level sources told ProPakistani that the lender has recommended applying the same rate of excise on all locally manufactured cigarettes, regardless of whether the manufacturer is local or foreign. It further wants to tax e-cigarettes in a similar way to tobacco, given equivalent internality.
These recommendations aim to ensure fairness in the taxation of cigarette products, regardless of their origin.
Sources said the IMF suggested that e-cigarettes should be taxed similarly to traditional tobacco products, citing similar internal effects on health.
The lender has advised expanding the application of the Distorted Production Levy (DPL) tax to include machinery inputs that contribute to pollution. It wants Pakistan to discontinue accelerated depreciation benefits for projects related to alternative energy.
To bolster revenue, the IMF advised gradually increasing excise taxes on domestically produced cards and luxury items such as yachts. The lender also recommended strengthening border controls to curb the smuggling of oil derivatives, particularly from sensitive regions.
Looking towards the future, the IMF proposed streamlining the tax system by reducing the number of taxed items. In its purview, this would involve eliminating excise taxes on products that lack negative externalities, significant revenue potential, highly inelastic demand, or luxury characteristics, sources added.
Lastly, the IMF recommended exercising pre-paid income tax refunds on telecom bills to formal employees who pay the Personal Income Tax (PIT) as a means of incentivizing compliance with tax regulations.
