FPCCI rejects over Rs700b new taxes in Budget 2021-22 under IMF deal

The Federation of Pakistan Chambers of Commerce and Industry has rejected the government’s plan of imposing additional taxes of over Rs700 billion in the upcoming federal budget 2021-22 under the International Monetary Fund’s deal.

The FPCCI’s Businessmen Panel Chairman and apex chamber ex-president Mian Anjum Nisar said that the government and the IMF have reached a staff level agreement to revive the stalled $6 billion program, as the Fund has announced to disburse $500 million’s third tranche, assigning the task to government to generate additional Rs700 billion from the trade and industry through new taxes in the upcoming budget.

He resented that the frequent increase in electricity tariff and petroleum products’ prices along with burden of new taxes on the behest of the International Monetary Fund (IMF) is dangerous game for the economy of the country, as it would make the Pakistani products uncompetitive in the international market.

He said that the new taxation measures include increasing income tax burden of the salaried and business individuals and the corporate sector, as the government will also withdraw about Rs360 billion worth of sales tax exemptions from next year while the sales tax is already high.

He said that during the first year of the IMF program, the government had introduced over Rs735 billion taxation measures to achieve the Rs5.5 trillion tax target but the measures did not help the government achieve its target despite putting additional burden on trade and industry.

He said that the country’s economy is recovering from a slow pace of growth and it will be an uphill task for the FBR to chase the high target of tax collection.

“It is impossible for the Pakistan’s economy to sustain the burden of additional tax burden equal to 1.5 percent of the GDP at a time when the economy just recovered from the Covid pandemic,” he pointed out.

Mian Anjum Nisar said that the government continued to raise gas and power tariffs, besides lifting rates of petroleum products twice a month to qualify for the revival of the stalled $6 billion IMF loan program, leading the economy towards point of no return due to interference of the International Monetary Fund.

He said that the IMF has also asked the government to reduce the number of income tax slabs for the business class, which will increase the tax burden of the people falling in higher income brackets, resulting into jump in cost of production and high inflation.

He said that the regular attempt of economic managers to impose new taxes and increasing oil prices along with the hike in power and gas tariffs will ultimately harm the government’s overall move of reducing the production cost for the businesses.

He said that industry is the main victim of this IMF interference, as donors’ involvement in the Pakistan’s economic matters and dictations to the policy makers for taking harsh measures would add to the economic miseries of the country.

Mian Anjum Nisar said that Pakistan is the most frequent customer of IMF and governments often depended on borrowing from IMF and accepted stringent conditions despite the fact that this institution is merciless money lender which always forced Pakistan to adopt bad policies like new taxes in the budget, rupee devaluation and massive increases in the electricity and gas prices. It is very unfortunate that the government has given go-ahead to the economic team to fulfill all the required prerequisites for revival of the stalled program under $6 billion Extended Fund Facility, setting aside the miseries of the trade and industry. He said that the new taxes, in a bid to fulfill the IMF condition, will destroy the local as well as export industry that is already facing high cost of production.

Mian Anjum Nisar said that despite challenges due to the coronavirus, Pakistan’s economic performance remained encouraging, as the current account balance, foreign exchange reserves and stock exchange have improved significantly. Inflation is projected to stay in the range of 8.3%.

“All these positive indicators might take the reverse gear if the authorities take decision to impose more taxes along with hike in the power and gas tariffs on IMF dictation,” he warned.

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