ISLAMABAD - The government Thursday approved additional duties on petroleum products and furnace oil to generate more revenue for achieving its revised tax collection target of Rs2, 691 billion.

“The ECC (Economic Coordination Committee), on an FBR proposal, allowed levy of 2 percent regulatory duty on petroleum crude oil, motor spirit oil and furnace oil. The approval was also accorded for imposition of 2.5 percent regulatory duty on high speed diesel,” the finance ministry stated.

“Both regulatory duties would be levied with effect from June 1. The step is aimed at getting over some of the revenue losses due to persistent fall in petroleum prices in the current financial year,” it said.

The government is to impose additional duties at a time when the Federal Board of Revenue (FBR) is struggling to achieve the revised tax collection target of Rs2,691 billion fixed for the ongoing financial year. The FBR accumulated Rs1,975 billion in 10 months (July to April) of the current fiscal year of 2014-2015. The board has to collect Rs716 billion during remaining two months (May and June).

The FBR collected Rs200 billion in April, which is 17 percent higher than the collection made in the same month of the previous year when the government had collected Rs170 billion.

The government has already revised the annual revenue collection target to Rs2,691 billion from budgetary target of Rs2,810 billion due to the continuous failure of the tax department to meet its targets. The government even imposed new taxes and duties to generate additional revenue for achieving the revised target.

The additional revenue measures include: (i) raising the GST rate on petroleum products (excluding furnace oil) from 17 to 27 percent in two stages; (ii) levying regulatory duties on steel products and scrap metal; (iii) introducing a regulatory duty on mobile phones; (iv) levying an additional 5 percent regulatory duty on furnace oil; (v) increasing the withholding tax on nonfiler contractors, service providers, and importers; and (vi) increasing import duty on luxury items; and (vii) reducing electricity subsidies by 0.1 percent of GDP.

In addition, the government will retrieve the GIDC already collected by large fertiliser companies. Together, these steps are expected to raise 0.45 percent of GDP (around Rs117 billion). Despite introducing mini-budgets, the government is struggling hard to achieve the target.

Pakistan has recently informed the International Monetary Fund (IMF) that federal tax collections increased by 14.8 percent in the first half of FY2014-15, but the second-quarter indicative target was missed due to legal challenges to tax measures and the fiscal effects of the drop in crude oil prices.

Due to legal challenges, the GIDC has so far produced only 1/10th of an expected annual yield of 0.6 percent of GDP (including GST on the GIDC) in FY2014-15. Also, a court has stayed 10 percent tax on the value of bonus shares, which was estimated to bring in 0.1 percent of GDP. The plunge in oil prices has produced a shortfall in GST revenue from petroleum products, which fell by 19 percent in the second quarter of FY2014-15. Without corrective measures, these would have resulted in a fiscal gap of 0.45 percent of GDP relative to the program target by the end this financial year.


Usman Cheema adds: There is no relief for the masses as the government has decided to keep the oil prices unchanged for the month of May. The Petroleum Ministry whereas had proposed some decrease in the fuel prices that has been turned down by the Finance Ministry.

Following proposal of the Petroleum Ministry, Oil and Gas Regulatory Authority had also recommended decrease in the prices for the month of May but the Finance Ministry declined the proposal, deciding not to change the prices.

Earlier, it was expected the prices of high speed diesel and petrol will be decreased by Rs1 per litre. High Octane on the contrary was expected to go up as per the Ogra recommendations.

Officials whereas believed that in a way the government neither accepted nor rejected the proposal as it neither increased nor decreased the prices as were recommended by the Ogra. They said that the overall impact would have been the same as there were some products such as petrol and high speed diesel of which the price was recommended to be decreased but at the same time it was suggested to increase the price of kerosene oil by Rs2 per litre.