ISLAMABAD   -   The PTI led coalition government is likely to present the Tax Laws (Fourth) Amendment Bill (mini budget) and bill regarding granting autonomy to the State Bank of Pakistan (SBP) before the parliament in the upcoming week.

The Ministry of Finance and Federal Board of Revenue (FBR) had almost finalized the Tax Laws (Fourth) Amendment Bill. Officials said that it depends on the government when to present these two bills before the federal cabinet and the parliament for approval to fulfil the conditions of the International Monetary Fund (IMF). They said that government would approve the bill before January 12, 2022 when the Executive Board of the IMF would meet to discuss Pakistan’s sixth review under Extended Fund Facility.     

However, the government might face problems in convincing its allied partners on the aforesaid two bills. The Tax Laws (Fourth) Amendment Bill would unleash new wave of inflation in the country. The PTI’s lawmakers’ are already blaming high inflation rate for their defeat in major cities in recently held local bodies’ election in Khyber Pakhtunkhawa. Therefore, the government has withdrawn these two bills from the last federal cabinet’s agenda meeting, which was held on last Tuesday.  

Muszammil Aslam, Spokesperson for Adviser to Prime Minister on Finance and Revenue, had already said that the IMF Board would consider Pakistan’s request for completion of the 6th review and release of next tranche on January 12, 2022. The officials in Ministry of Finance are hopeful that all prior actions would be fulfilled within the desired deadlines. In the upcoming mini budget, the government would introduce taxation measures worth of Rs350 billion. The government is likely to withdraw the GST exemptions in different sectors. Meanwhile, it would also enhanced the withholding tax on telecom sector from 10 to 15 percent in order to raise tax revenues of Rs350 billion.

The government has recommended imposing 17 percent sales tax on the import of raw materials used in the manufacturing of medicines. However, local supplies of medicines (end-product) would be zero-rated. The government has also proposed to impose 17 percent sales tax on the items with dedicated use of renewable sources of energy such as solar and wind including solar PV panels; LVD induction lamps; SMD, LEDs, with or without ballast, with fittings and fixtures; wind turbines including alternators and mast; solar torches and lanterns, and related instruments.

It has also suggested to impose 17 percent sales tax has been proposed to be imposed on the import of plant, machinery and production line equipment used for the manufacturing of mobile phones by the local manufacturers of mobile phones; laptop computers, notebooks whether or not incorporating multimedia kit and personal computers; sunflower and canola hybrid seeds meant for sowing and combined harvesters up to five years old. Sales tax has been proposed on the import of live animals live poultry and eggs.

It is worth mentioning here that the IMF had set five prior actions for Pakistan included mini-budget before approving the loan tranche of slightly above $1 billion in January 2022.

Five prior actions included withdrawal of sales tax exemptions through supplementary bill (mini budget), approval of SBP amendment bill from the parliament, increasing petroleum levy by Rs4 per litre per month so that it reached Rs30 per litre, audit report of Covid-19 expenditures and Pakistan would provide the details of the beneficial owners of the vaccine supplying companies.