Pakistan’s parliament on Friday passed the government’s tax- heavy finance bill for the coming fiscal year ahead of more talks on a new IMF bailout as it seeks to avert a debt default for an economy growing at the slowest pace in South Asia.
The government presented the tax-loaded budget two weeks ago, drawing sharp criticism from opposition parties.
Finance Minister Muhammad Aurangzeb moved the finance bill in parliament, which was endorsed by the ruling alliance led by Prime Minster Shehbaz Sharif.
Speaker Sardar Ayaz Sadiq announced the passage of the bill in a live TV telecast.
Policymakers have set a challenging tax revenue target of 13 trillion rupees ($46.66 billion) for the year starting July 1, up about 40% from the current year, in the national budget presented on July 12 that looked to strengthen the case for a new rescue deal with the International Monetary Fund (IMF).
Pakistan is in talks with the IMF for a loan of $6 billion to $8 billion.
The rise in the tax target is made up of a 48% increase in direct taxes and a 35% hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by a whopping 64%.
The tax would increase to 18% on textile and leather products as well as mobile phones besides a hike in the tax on capital gains from real estate.
Workers will also get hit with more direct tax on income.
Opposition parties, mainly parliamentarians backed by the jailed former Prime Minister Imran Khan, have rejected the budget, saying it will be highly inflationary.
Pakistan has projected a sharp drop in its fiscal deficit for the new financial year to 5.9% of gross domestic product (GDP), from an upwardly revised estimate of 7.4% for the current year.
Pakistan’s central bank has also warned of possible inflationary effects from the budget, saying limited progress in structural reforms to broaden the tax base meant increased revenue must come from hiking taxes.
The upcoming year’s growth target has been set at 3.6% with inflation projected at 12%.
(Reuters)
