NA passes 170bn mini-budget to to fulfill IMF demands

ISLAMABAD: While approving the finance supplementary bill 2023, the National Assembly has approved the imposition of Rs 75,000 to Rs 250,000 Federal Excise Duty (FED) on Club, Business and First Class air tickets.

Winding up the speech in the National Assembly, Finance minister Ishaq Dar said that the government on the recommendation of the Senate Finance committee, fixed FED on Club, Business and First Class air tickets ranging from Rs75000 to Rs 250,000.

He said that in finance supplementary bill 2023, the government had proposed to increase business, first or club classes air tickets to 20% of the air ticket or Rs50,000 whichever is higher.

According to the Finance minister, “The International Air Transport Association (IATA) has maintained three standards worldwide and keeping those in view, we have fixed Rs 250,000 FED for Canada, North America and South America destinations. The first class ticket of these destinations is around Rs 1.8 million to Rs 2 million.” These destinations have been maintained as Tier I tickets.

Similarly, the First or Business class air ticket for tier II, (Middle East and Africa) is Rs 0.5 million and we have imposed Rs 75,000 FED on these tickets.

Meanwhile, a Business or First class air ticket for tier III (Europe) is approximately Rs 0.8 to Rs 1 million and we have decided to fix Rs150,000 FED on these routes.

Furthermore, the Government will collect Rs150,000 FED on people travelling on Business, First or Club class for Far east, Australia, New Zealand.

While rejecting the Finance committee’s recommendation not taxing companies’ shares, the Finance minister said that the government will collect 10 % tax on the shares’ income of the companies that are not trading on stock exchange.

He said that people are not in a habit of paying taxes on the income of shares that are not publicly listed. Due to this, we do not accept the Finance committee recommendation.

He said that this is an adjustable tax and there is no additional tax on those who pay complete taxes.

Finance minister also said that the government had proposed to increase the FED on cigarettes in the Finance supplementary bill 2023, however we have added a new provision in the bill just to stop the tax avoidance. Under this, every cigarette brand will pay duty taxes on each category prior to the 2023 finance supplementary bill.

Explaining this provision, one official of FBR said that the government has  added a new provision with regard to rates of duty on cigarettes.

In order to ensure the revenue collection from cigarette brands, FBR stated that expensive brands shall remain in serial no. 9 despite the changing of the tax slab. Adding to that, he said that no one can change the tax slab.

Earlier, FBR through an SRO increased the rate of FED from Rs 16500 on retail price exceeding Rs 9000 and Rs 5050 on retail price less than Rs 9000.

Finance minister said that we have been making negotiations with the IMF for the last ten days. Initially there was news that the government may impose upto Rs 800 billion in new taxes, and reality was not different.

He said that I also do not like that the government imposes taxes but our power sector is bleeding. He further said that we are collecting Rs 1550 billion against the production cost worth Rs 3000 billion from the electricity sector. Three things including Line losses, electricity theft and non payments of bills are main reasons for circular debt.

He further said that the government in the last budget, allocated approximately Rs 600 billion in subsidies which was not enough as there is still a gap of Rs 800 billion between subsidy and the recovery amount.

We were compelled to impose Rs 170 billion in taxes, except for the food sector, to curtail circular debt of the power sector, he added.

Finance minister said that FBR will achieve the yearly revenue target of the current fiscal year and we have satisfied the IMF on this.

Ishaq Dar said that we have not made a deal with the IMF, this was done by the previous government on tough conditions and then they suspend the deal owing to non-fulfilment of conditions once the no confidence motion was submitted by the opposition in parliament.

He said that Pakistan will meet the sovereign commitments come what may the situation.

He also said that our government has increased the stipends by 25% (Rs 40 billion), totalling to Rs 440 billion against the initial allocation of Rs 340 billion, to BISP beneficiaries, to offset the inflation as well as impact of new taxes.

The Finance minister said that the Prime Minister will also announce an Austerity drive in parliament in the coming days to minimize the expenditures.

He said that there is a need to curtail the budget deficit as loans surged from Rs 25000 billion in just four years. He clarified that we have also started work for next year’s budget which will be presented in May or June.

The Finance minister said that everyone should look introspectively, as to how the Pakistani economy has been brought to its current condition. The FM also said that he was confident that Pakistan would once again stand on its feet once this bill is implemented.

Earlier today in interaction with the media, State Minister for Finance and Revenue, Aisha Ghaus Pasha said the Finance (Supplementary) Bill 2023 is likely to be approved today by the National Assembly.

The minister added that the government has decided to get the mini-budget approved by the lower house.

“Virtual discussions with the International Monetary Fund (IMF) are ongoing and talks will also take place today,” the minister said.

Pasha hoped for a staff-level agreement to materialise with the IMF soon. “Matters with the IMF are progressing in a positive direction. A further delay in the agreement is unlikely.”

Finance Minister Ishaq Dar tabled the bill in the National Assembly and Senate on February 15 with budget proposals presented seeking to fulfil the prerequisites for unlocking the crucial $1.1 billion IMF loan tranche which will help cushion the country’s dwindling economy.