Peshawar   -   With the finance bill’s approval by President Asif Ali Zardari, a storm of inflation is set to hit Pakistan from today (July 1).

The national budget, unveiled on June 12, targets a formidable tax revenue of 13 trillion rupees ($46.66 billion) for the new fiscal year—a 40 percent increase from the current year. This ambitious goal is aimed at securing a new rescue deal with the international money lender IMF.

The budget includes a 48 percent rise in direct taxes and a 35 percent hike in indirect taxes over the revised estimates for the current year. Non-tax revenue, such as petroleum levies, is expected to surge by 64 percent. Specific tax increases target essential goods and services: an 18 percent tax on textile and leather products, mobile phones, and higher taxes on capital gains from real estate. Workers will also face increased direct taxes on their income.

Opposition parties and major trade bodies have rejected the budget, arguing it will cause significant inflation and lead to industry shutdowns. Pakistan’s central bank has also warned of potential inflationary effects, highlighting the need for structural reforms to expand the tax base.

Starting July 1, the prices of essential items will rise significantly.

Meat, mobile phones, herbal and homeopathic medicines, and educational expenses for children will all see substantial price hikes.

The cost of chicken, beef, and mutton will increase, adding to household expenses. Mobile phones, especially those costing less than $500, will incur an 18% sales tax, leading to higher prices.

Stationery items will also be affected, with a 10% sales tax imposed on products such as colored pencils, ink, erasers, sharpeners, pens, ballpoints, and markers, raising educational costs for children. Additionally, a 10% sales tax will apply to animal feed, including poultry and livestock feed, as well as sunflower and canola seed-based food products.

The new Finance Amendment Bill also introduces severe penalties for tax evaders, including imprisonment of up to 10 years and fines equal to 100% of the evaded tax amount. Tax evasion involving Rs 500 million could result in up to 5 years of imprisonment, while evasion of Rs 1 billion or more could lead to a 10-year prison sentence.

Initially, the bill proposed raising the maximum limit of petroleum levy on petrol and diesel from Rs 60 to Rs 80, but it has been revised to Rs 70. The levy on kerosene, light diesel, and E10 petrol will remain capped at Rs 50.

Overall, the Finance Amendment Bill’s approval is anticipated to trigger a wave of inflation, affecting various essential goods and services, and increasing the financial burden on the general public. The new fiscal measures have sparked widespread concern and opposition, underscoring the challenges ahead for Pakistan’s economy, particularly for the salaried class and other citizens.