On Monday, the government signed the Tax Laws (Second Amendment) Ordinance, 2022 which includes some relief traders, transporters and the Pakistani diplomats posted abroad. To make up for these concessions however, the tobacco sector will be taxed to collect an additional Rs18 billion to meet the targets set by the IMF. This revision comes a week before the IMF is set to take Pakistan’s request for completion of the two pending reviews for the release of the $1.2 billion tranche of the loan programme.
Because of the tax relief measures and additional expenditures included in this ordinance, the government will have to make up a deficit of about Rs75 billion. As part of the 2022 budget, the government had introduced a fixed tax scheme for retailers on commercial electricity connections with the aim to collect Rs42 billion. However, now the FBR has withdrawn the fixed tax scheme retrospectively from July 1 this year.
According to reports, through this ordinance the government has also taken measures to remove difficulties of taxpayers in addition to corrective measures to rationalise certain taxes and rates. The advance tax rates on passenger transport vehicles have been rationalized, and the government has also given an exemption to vehicles for passenger and goods transport and of foreign diplomats and missions from capital value tax (CVT).
The changes made as part of this ordinance are not concerning per se, though in some quarters there is a feeling that traders are being accommodated to an unreasonable extent. It is good to see the government hold its ground and not provide any relief for the bankers, stock market brokers and the real estate sector. However, the main issue is the constant back and forth with several mini-budgets being announced which only adds to the confusion for key stakeholders and sectors of the economy. Better planning is needed going forward and ideally, an annual budget should be presented yearly which is fiscally stable and feasible to last a whole year without multiple amendments.
Because of the tax relief measures and additional expenditures included in this ordinance, the government will have to make up a deficit of about Rs75 billion. As part of the 2022 budget, the government had introduced a fixed tax scheme for retailers on commercial electricity connections with the aim to collect Rs42 billion. However, now the FBR has withdrawn the fixed tax scheme retrospectively from July 1 this year.
According to reports, through this ordinance the government has also taken measures to remove difficulties of taxpayers in addition to corrective measures to rationalise certain taxes and rates. The advance tax rates on passenger transport vehicles have been rationalized, and the government has also given an exemption to vehicles for passenger and goods transport and of foreign diplomats and missions from capital value tax (CVT).
The changes made as part of this ordinance are not concerning per se, though in some quarters there is a feeling that traders are being accommodated to an unreasonable extent. It is good to see the government hold its ground and not provide any relief for the bankers, stock market brokers and the real estate sector. However, the main issue is the constant back and forth with several mini-budgets being announced which only adds to the confusion for key stakeholders and sectors of the economy. Better planning is needed going forward and ideally, an annual budget should be presented yearly which is fiscally stable and feasible to last a whole year without multiple amendments.
