The International Monetary Fund (IMF) has declined key concessions proposed in the Finance Bill 2024.
The IMF has also refused to allow the restoration of a fixed income tax regime for export proceeds, despite strong lobbying from exporters. The government proposed increasing the fixed tax rate for exporters from 1 percent to 2- 3 percent, but the IMF has demanded that all incomes, including exporters, should be taxed under the normal regime, reported a national daily.
Meanwhile, the lender has agreed with the government’s proposal to abolish GST on textbooks, restore rebates for professors and researchers, withdraw Federal Excise Duty (FED) on cement, and make some other technical adjustments.
The government is finalizing the Finance Bill, which will be presented to the National Assembly this week. A significant concern is how the government will manage the fiscal space of Rs. 250 billion created by reducing the Public Sector Development Program (PSDP) from Rs. 1,400 billion to Rs. 1,150 billion. The IMF is opposed to using this cushion to reduce tax rates.
Pakistan and the IMF have been engaged in virtual discussions for a while now. The government requested the withdrawal of GST on stationery items, but IMF only agreed to remove GST on textbooks, leaving other items like pencils, sharpeners, and exercise books subject to an 18 percent GST rate.
The current Finance Bill 2024 proposes that individuals earning income from exports pay a 1 percent tax on their export proceeds as the final tax. On whether taxpayers with equal income should pay equal tax, it was proposed that income from exports be subject to normal rates with a 1 percent tax collection on export proceeds treated as a minimum tax. The IMF has rejected this proposal as well.
The government plans to increase the FED on international air tickets, doubling the rate for the next fiscal year.
Regarding property and tax rates for the salaried and non-salaried classes, the IMF has rejected all requests for major changes in the proposed Finance Bill. The IMF is also against the gradual GST rate reduction of 6 percent for FATA/PATA.
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Beggars can’t be choosers
When will we learn stop subsidy at all costs. Govt need to tax and earn money subsidy has killed all the sectors. It is high time every one pays the same price.