ISLAMABAD: With inflation staying out of control, people should brace more price hikes as the caretaker government is eyeing to collect another Rs18 billion each month through additional taxes on a variety of items ranging from sugar to consumer goods.
It means Islamabad will manage another Rs90 billion in revenue generation during the remaining five months of the fiscal year 2023-24, after missing the original targets, which resulted in its inability to bridge the budget deficit.
SWEETENER TO GET BITTER
In this connection, the caretaker government has shared a plan with the International Monetary Fund (IMF) which has praised Islamabad for increasing the energy tariffs, promising a 5 per cent federal excise duty on the sugar – a move that will ultimately also result in higher prices of products in which it is used.
Meanwhile, the plan envisages an overall tax collection target of Rs11,000 billion with an increase of Rs1,590, as the IMF has been persistent with its demand to increase tax collection and reduce budget deficit through a range of measures which are inflationary in their nature.
GST HIKE
According to the document, Islamabad will also increase the general sales tax (GST) – which is known as VAT (value addition tax) in many countries – from 15pc to 18pc on textile and leather products.
It is expected additional taxes would be imposed on machinery, raw material, supplies, services and contracts [awarded by the government].
However, one may question the wisdom behind the decision as it may further negatively impact the cost of production and sales amid the shrinking purchasing power and the worsening cost of living crisis triggered by a record-high inflation.
PETROLEUM DEVELOPMENT LEVY
The government is also going ahead with boosting the petroleum development levy collection annually to Rs1,065 billion against the present target of Rs918 billion.
It means that the additional amount collected during February-June 2023-24 through the increase in petroleum development levy would be Rs49 billion and Rs147 billon in 2024-25 – the next fiscal year.
GAS PRICES
The IMF in its latest staff-level report on the $3 billion stand-by arrangement has noted that Pakistan would announce the six-monthly gas tariff adjustment by February 15.
It would be third gas price hike during the current financial year after a record increase in December 2023.
