Important concessions included in the Finance Bill 2024 have been rejected by the International Monetary Fund (IMF).Despite heavy lobbying from exporters, the IMF has also declined to permit the reinstatement of a fixed income tax structure for export revenues. The IMF has insisted that all incomes, including those of exporters, be subject to regular regime taxation, despite the government’s proposal to raise the fixed tax rate for exporters from 1 percent to 2–3% percent, as per a national daily.
In the interim, the lender has approved the government’s plan to remove the Federal Excise Duty (FED) on cement, reinstate professor and researcher rebates, eliminate the GST on textbooks, and make a few other technical changes.
The Finance Bill, which will be introduced to the National Assembly this week, is currently being finalized by the government. How the government will handle the Rs. 250 billion in fiscal space that results from cutting the Public Sector Development Program (PSDP) from Rs. 1,400 billion to Rs. 1,150 billion is a major source of concern. Reducing tax rates utilizing this buffer is not supported by the IMF.
For some time now, there have been virtual negotiations between Pakistan and the IMF. The IMF only agreed to eliminate the GST on textbooks, leaving other things like pencils, sharpeners, and practice books subject to an 18% GST rate. The government requested that the GST be removed from stationery items.
The present Finance Bill 2024 suggests that the ultimate tax for people who receive money from exports be one percent of their export revenues. Regarding the question of whether taxpayers with identical income should pay the same amount in taxes, it was suggested that export revenue be taxed at regular rates, with a minimum tax of one percent collected from export sales. This suggestion has also been turned down by the IMF.For the upcoming fiscal year, the government intends to double the FED on tickets purchased internationally.All requests for significant modifications to the proposed Finance Bill pertaining to property and tax rates for the salaried and non-salaried classes have been turned down by the IMF.
