Pakistan Aims to Raise $379 million in New Taxes to Meet IMF Targets

Pakistan has decided to levy an additional 5 to 10 percentage point of tax on luxury items. Finance Minister Ishaq Dar stated that this increase should not affect the common Pakistani citizen. REUTERS/ Khuram Parvez

By Asad Hashim

ISLAMABAD, Nov. 30 (Reuters) – Pakistan must raise an extra $379 million through new tax measures, the finance minister said on Monday, as the government seeks to qualify for its latest IMF loan tranche.

Earlier this month, the IMF approved the release in December of a $502 million tranche of Pakistan’s three-year $6.68 billion programme, even though the government missed targets for tax revenue generation, net domestic assets and the budget deficit.

The government will levy an additional 5 to 10 percentage points of tax on 350 items and raise customs duty by 1 percentage point, Finance Minister Ishaq Dar said in the capital Islamabad.

The full list of items was not immediately available.

The increased levies would target “non-essential luxury items” only, and exemptions on the customs duty have been offered for 25 key industrial sectors, Dar said on Monday.

“We have kept in mind not to increase duties that would make items more expensive for the common man,” he said.

Separate increased taxes were also announced on imported automobiles – both new and used – and domestically-produced cigarettes.

In its last review, the International Monetary Fund had warned that the release of December’s approved $502 million tranche depended on the announcement of new measures to generate an extra 40 billion Pakistan rupees ($380 million) in revenue.

“This was a deadline in a sense, and if the government didn’t do it the next tranche of the programme would at least be delayed, if not suspended,” Khurram Husain, an economic analyst and journalist, told Reuters.

It was unclear if the new measures would meet the target: Dar had earlier told a parliamentary standing committee that the increased duties were meant to restrict Pakistan’s import bill, not increase revenue.

Husain said if the measures did not raise enough funds, the government would have to raise taxes on staples such as electricity and petrol. ($1 = 105.4600 Pakistani rupees)

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