The government has decided to introduce new taxation measures worth Rs15 billion in the next few days in order to meet the IMF’s tax collection target before the loan programme can be revived. While there is little clarity at this point regarding what sectors will be taxed specifically, the new measures are expected to be introduced ahead of the IMF board meeting which is scheduled for August 24.

As part of the agreement with the IMF, the government had assured that it would collect Rs42 billion in fixed taxation from shopkeepers. However, because the government relented under the pressure imposed by influential traders, the tax collected from them will now amount to Rs27 billion. This was not a positive decision considering how we are already struggling to expand our tax base, and will now have to look towards other sources to make up for the Rs 15 billion deficit.

To make up for this loss, reports suggest that that the authorities have proposed several areas for either increasing tax rates or imposing fresh ones. Some reports have suggested that the government has been considering the option of imposing taxes on fertiliser, sugar and textile sectors. However, officials have clarified that there is no proposal on the table to tax fertiliser, adding that the government is focused on facilitating the agriculture sector. One of the sectors that is likely to be taxed is tobacco and cigarettes, which would be a good move given that the two are under-taxed as it is.

While the government appears confident that it will meet the given targets, it is still not clear when the $1.17 billion tranche will be released. Though both the government and the IMF have stated on multiple occasions that it will be disbursed soon, some clarity would be helpful given how critical those funds will be for helping stabilising the economy and the overall macroeconomic situation in the country.