ISLAMABAD: In an attempt to bridge the revenue gap caused by higher-than-expected salary hikes and tax relief on solar panels, the federal government has approved new tax measures worth Rs36 billion as part of its commitment to the International Monetary Fund (IMF).
The decision was endorsed by the National Assembly’s Standing Committee on Finance, following the widening fiscal gap after the government increased salaries by 10 percent instead of the originally proposed 6 percent and reduced the proposed 18 percent tax on solar panel imports to 10 percent.
The Federal Board of Revenue (FBR) chairman revealed that these relief decisions resulted in a reduction in the revenue targets agreed with the IMF. “The IMF called for an alternative plan, and in response, six proposals were submitted, three of which were accepted,” he said.
To bridge the gap, the government has proposed the following new tax measures: A federal excise duty of Rs 10 on day-old chicks, raising concerns in the poultry sector; a 29% tax on profits earned by corporate entities through mutual funds; and, a 20% tax on payments from government securities.
According to the FBR, the IMF has approved these three measures as a suitable alternative to maintain fiscal discipline under the ongoing program.
However, the FBR warned that failure to implement the agreed measures could force the government to revert to its original plan of imposing an 18% tax on solar panel imports, potentially hampering the country’s growing shift towards renewable energy.
