Whey Finance

Government takes giant step for IMF conditions


The National Assembly on Thursday approved a controversial supplementary finance bill – also dubbed the ‘mini-budget’ – worth 360 billion rupees with a majority vote and bulldozed the bill. State Bank of Pakistan (SBP) Amendment Act to give absolute autonomy to the central. banking – both measures aimed at meeting two critical conditions set by the International Monetary Fund (IMF).

The government bowed to pressure from local auto assemblers and raised the sales tax rate to 12.5% ​​on imported electric vehicles – even higher than the original 5% rate it had proposed when the “mini-budget” was introduced.

He also waived 15% income tax in favor of a few wealthy families in the country.

The government suspended National Assembly rules that require at least two days’ debate on any bill and rushed through the SBP’s amendment bill – in just 48 minutes.

However, the government allowed debate on the mini-budget and approved minor changes to the Sales Tax Act, income tax, Customs Act and federal excise duty.

Prime Minister Imran Khan, who before coming to power had sworn he would not go to the IMF, remained present in the lower house of parliament until midnight to ensure that disgruntled members of his party and his allies vote to pass both bills to meet IMF conditions.

Read: Government bulldozes mini budget and SBP bill by NA amid opposition protests

The opposition twice forced the government to count the votes during the adoption of the mini-budget. There were a maximum of 168 Treasury members present in the House against 150 from the opposition, giving Prime Minister Imran an 18-vote advantage.

The IMF has set five preconditions for reviving the stalled $6 billion program, including adopting the mini-budget and granting absolute autonomy to the central bank, with the federal government not controlling its operation.

In its desperation to pursue the next $1 billion loan tranche, the government ignored objections raised by the Prime Minister’s Office and Finance Minister Shaukat Tarin on the central bank bill, which passed to the satisfaction of the IMF and the Governor of the SBP.

The IMF board meeting was scheduled for January 12 but was postponed due to a delay in the approval of these bills.

Finance Minister Tarin said the next tentative board meeting date was either Jan. 28 or Jan. 31.

PML-N MP Khurram Dastgir Khan said there was a storm of inflation as the prices of 51 most essential items affecting the poorest rose by 22% last week.

“Inflation is killing people now,” he added.

Where the government withdrew sales tax exemptions of Rs 335 billion which will affect all segments of society, it has approved income tax exemption for the wealthiest people, who own real estate investment trusts (REITs).

Out of Rs 360 billion, Rs 335 billion of sales tax exemptions have been withdrawn.

Tax measures of about Rs 7 billion have been taken in the form of a 50% increase in the rate of tax on telephone calls and a 100% increase in the anticipated income tax on telephone calls. car registration.

A tax of Rs 3 million was also imposed on overseas produced dramas.

In addition to this, the government has also increased federal excise duties on the purchase of locally manufactured and imported cars to generate around Rs 20 billion more in revenue.

Read more: Prime Minister Imran and Khattak engage in ‘spirited discussion’ during parliamentary meeting

The government imposed a General Sales Tax (GST) of 17% on infant milk if it was valued at more than 500 rupees per 200 grams of powder.

He removed the 17% GST that was previously proposed to tax bicycles.

The government also removed the 17% GST on chili peppers and iodized salt.

However, it imposed a 17% GST on breads, vermicelli, naan, chapatti, sheer mal, buns and rusks sold by all grocery stores, bakeries and restaurants that were incorporated into the Federal Board of Revenue (FBR) through “Point of Sales”. ‘ Machinery.

While bowing to pressure from local auto assemblers, the government raised the sales tax rate on imported electric vehicles to 12.5%.

It kept the GST rate on hybrid vehicles up to 1800 cc unchanged at 8.5% and set the rate at 12.75% on hybrid vehicles over 1800 cc.

Similarly, the government has significantly increased federal excise duty rates on locally produced and imported cars. On imported cars of 1001-1799cc engines the DEF was doubled from 5% to 10%, on 1800-3000cc engines the rates were increased from 25% to 30% and from 3001cc engines and above they have been increased from 30% to 40%.

The government kept the federal excise duty rate on cars up to 1300 cc unchanged at 2.5%, but increased the rate on 1301 to 2000 cc to 5% and above 2000 cc to 10 %.

The National Assembly has also given the go-ahead to impose a 17% sales tax on pharmaceutical raw materials to generate Rs 160 billion.

Growth retardation premixes were taxed at 17%.

The tax on preparations and confectionery provided by restaurants, bakeries, caterers and confectionery has increased from 7.5% to 17%.

Imported edible vegetables were taxed at 17%. Imported grain was also subject to the 17% tax.

Matchboxes are taxed at the rate of 17%. Whey excluding those sold at retail under a brand and sausages and similar products made from poultry meat or offal excluding those sold at retail under a brand or brand are taxed at 17% .

The tax rate on flavored milk sold in branded retail packages has been increased from 10% to 17%.

The rates for yoghurt, cheese, butter, cream, desi ghee, whey, milk and cream sold in branded retail packages have also been increased from 10% to 17%.

Machines and equipment related to dairy products were taxed at 17% against 5% currently.

Mobile phones were taxed at the standard rate of 17% over the current fixed rate.

Supplies made from points of sale integrated into the computerized system of the FBR which are currently taxed at 10% will now be taxed at 12%.

The tax rate for sausages prepared or preserved frozen has been increased from 8% to 17%.

Seeds, fruits and spores of a type used for sowing were taxed to generate Rs 4 billion.

The importation of newsprint, newspapers, magazines, periodicals, books – with the exception of directories – was taxed at 17% for Rs 1.5 billion each year.

The government hastily approved the SBP Amendment Bill in just 48 minutes by suspending the assembly rules.

The finance minister had proposed the bill at 10:06 p.m. and the NA president announced his approval at 10:54 p.m.

The PML-N and the PPP first pleaded with the Speaker of the National Assembly to let the debate proceed, then, in sheer frustration, gathered outside his office to prevent him from bulldozing the works of the parliament.

However, nothing could prevent the PTI-led government from handing over absolute autonomy to the central bank, which Syed Naveed Qamar of the PPP said would “compromise national security”.

“I beg of you…please don’t suspend the rules and allow the House to debate the most important bill in the history of the country for at least two days,” said PML’s Ahsan Iqbal -NOT.

Read also : Maryam calls for ‘all possible means’ to oust Imran-led government

However, even this could not move the speaker, who kept bulldozing one after another the amendments proposed by the opposition.

PPP Chairman Bilawal Bhutto Zardari while referring to another condition set by the IMF raised the question of when defense spending would be done from one account, wouldn’t it be easy for institutions and international powers to control the spending of the country’s nuclear program.

The bill, which will now go to the Senate for approval, allowed the central bank to target price stability as its primary objective, but does not set an explicit inflation target.

The new bill gave autonomy to the SBP, but neither parliament nor the federal government has the power to remove the governor for missing the inflation target.

The government made some changes to the final draft approved by the National Assembly.

This includes a two-year ban on the Governor and Deputy Governors of the SBP from seeking employment in any of the institutions with which they have dealt or negotiated during their term of office.

Dual nationals cannot become governors and deputy governors of the SBP.

Parliament and its standing committees can summon the Governor of the SBP to meetings.

However, the SBP will be completely independent in setting monetary policy, exchange rate policy, and will work largely in isolation from the federal government.

The SBP governor and his officers cannot take instructions from anyone in the federal government, including the prime minister.

The governor has become all-powerful. He will chair the executive committee, lead the monetary policy committee and will also be chairman of the board of directors of the SBP.

The Governor’s term has been extended to five years and his salary will be determined by the SBP Board of Directors.

The Minister of Finance’s power to appoint the Deputy Governor was removed and the Monetary and Fiscal Policy Coordinating Council was dissolved.