ISLAMABAD: Finance Minister Shaukat Tarin said on Thursday that the International Monetary Fund (IMF) programme is critical for Pakistan’s economy, adding that it is not just a one-billion-dollar tranche, but also includes other bilateral and multilateral lenders.
Tarin said the IMF programme brings in inflows from the World Bank, the Asian Development Bank, and other financial institutions, as well as bilateral sources, while speaking at a press conference with State Minister for Information and Broadcasting Farrukh Habib and Chairman of the Federal Board of Revenue (FBR) Dr Muhammad Ashfaq Ahmed after presenting the Finance Supplementary Bill 2021 and the SBP Amendment Bill 2021.
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The finance minister maintained that the tax exemption of Rs343 billion has been withdrawn in the Finance Supplementary Bill 2021 against Rs700 billion demanded by the IMF. He stated that he contested with the IMF to protect the food items from taxation. There would be tax impact of only Rs2 billion on the common man in the form of sales tax, the finance minister added.
He further stated that out of Rs343 billion, tax exemption of Rs112 billion on machinery and its products, and Rs160 billion tax exemption in pharmaceuticals has been abolished, which would be refundable and adjustable, while a tax exemption of Rs71 billion on other luxury items has been abolished. He said the finance supplementary bill has been designed for documentation of the economy.
The finance minister said that there would be no inflation through the proposed measures in the finance supplementary bill. He said that taxes are being increased on luxury vehicles, and the prices of medicines would not increase with the withdrawal of exemption on pharma industry. The pharma industry is being provided facility of rebate, which and expressed the hope that withdrawal of unnecessary exemptions would increase the tax-to-GDP ratio.
Tarin said that tax exemptions have been withdrawn on luxury items included imported fish, branded items, bakery items, imported bicycles, imported food items, chocolates, imported steaks, personal computers, sewing machines, match boxes, iodine salt and chillies.
The minister said that to maintain that these measures would increase inflation is not true as there would be no tax on local food items including wheat and its products, rice, vegetables, pulses, sugarcane, poultry and meat, agricultural tractors, fertilisers, pesticides, old clothes and cinema equipment. He said that there is hue and cry that supplementary finance bill would bring a storm of dearness/ inflation; this is not true. He said that taxes of only Rs2 billion have been imposed on the common man.
The finance minister said that no tax has been imposed on cars, only luxury cars have been taxed, taxes on the auto sector have nothing to do with International Monetary Fund (IMF). He said that taxes on luxury items have been imposed in view of trade deficit.
Replying to questions, he said that finance supplementary has been placed in the parliament and there would be a detailed discussion on it. He stated that it was not possible to share with the opposition owing to the Fund. We will discuss with the opposition in the parliament, he said adding that the agreement with the IMF is important for the economy because it brings other lenders such as the World Bank, the Asian Development Bank, and other financial institutions and bilateral in the country.