ISLAMABAD: Pakistan will impose an additional 10% tax on large-scale industry for a year to raise more than 400 billion Pakistani rupees ($1.93 billion) ahead of a deal to recoup crucial funding from the International Monetary Fund, finance minister said. miftah ismail Said on Friday.
The announcement comes earlier as Pakistan is expected to reach an agreement to unlock a new tranche of IMF funds, which is needed to avert a balance of payments crisis.
“I want to share the good news that this country is no longer heading towards a lapse,” the finance minister told Parliament in his concluding budget speech.
“We have taken very difficult decisions.
Ismail called it a super tax, urging the large scale industry to bear it for only one year to help raise the revenues needed immediately to cut the fiscal deficit.
He said it would be imposed on 13 large sectors including sugar, steel, cement, oil and gas, fertilisers, cigarettes, chemicals, automobiles, banks, textiles, LNG terminals and beverages.
Pakistan’s KSE 100 stock index fell 4.8% on Friday after the government announced a tax hike.
Ismail said that a revised budget would increase the revenue collection target from 7 trillion Pakistani rupees to 7.4 trillion Pakistani rupees after levying the tax.
A lump-sum tax slab of 10% to 40% will also be introduced on personal income of Rs 15 crore to Rs 40 crore annually, he said.
The IMF is pressuring Pakistan to increase revenues and cut expenditure to reduce the deficit so that it can get its next loan of $900 million, which has been suspended since the beginning of this year.
“It was necessary to restart the IMF program to save our country from default,” Ismail said, adding that Pakistan would post a positive primary deficit for the fiscal year 2022-23.
The South Asian nation is in dire need of IMF funding as it is in the grip of a financial crisis, forex reserves with the central bank have plummeted to $8.2 billion, and the Pakistani rupee is at a record low against the US dollar.
Pakistan entered the 39-month, $6 billion IMF program in 2019, but so far less than half the amount has been disbursed as Islamabad struggles to keep the target on track.
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