Income

IMF not happy with income tax decision: Miftah Ismail

Finance Minister Miftah Ismail during a press conference in Islamabad on June 11, 2022. Photo: PID

ISLAMABAD: Finance Minister Miftah Ismail revealed on Saturday that the International Monetary Fund (IMF) was unhappy with the budget, mainly because the government failed to implement income tax measures for individuals (IRP) suggested by it.

Addressing the post-budget press conference here at the P-Block Auditorium, he said there were no developments on the IMF front at the moment.

He admitted there was no choice but to make tougher decisions. He said further changes would be made to budget allocations after 15 days.

The government did not increase the tax rate on monthly wage income by 100,000 rupees per month, but took steps to impose higher taxes on property and wealthy people. The government has also introduced a fixed tax scheme for retailers offering them to pay Rs3,000 to 10,000 per month and the FBR would yield Rs 2.5 million [2,500,000] retailers in the tax net.

The power sector, the minister said, would drown the country as the government provided Rs 1.6 trillion in subsidies – Rs 1.1 trillion as a direct subsidy by providing Rs 11 per unit of electricity good consumer market and an additional Rs 500 billion mainly due to leaks resulting in circular debt accumulation.

“Pakistan cannot afford this kind of misadministration and mismanagement in the electricity sector, which exceeds the country’s total defense budget,” Minister Miftah said. He said running the country would become difficult if administrative matters were not sorted out.

To his critics, the Minister said he was not bringing back the money generated by rising petrol and diesel prices. He said avoiding a Sri Lanka-like default was the primary goal of the coalition government.

He said that fiscal consolidation was the main objective of the government. He said the trickle down approach failed in Pakistan, so they changed the approach to incentivize the poor and less privileged, and accelerated the growth trajectory.

He also pointed out that the circular debt of the gas sector had also ballooned to Rs 1.4 trillion due to unaccounted for gas (UFG).

Accompanied by Minister of State for Finance Ayesha Ghaus Pasha, Secretary of Finance Hamid Yaqoob and FBR President Asim Ahmed, Miftah Ismail painted a very gloomy picture of the country’s fiscal situation and said that the total net revenue of the government federal had become negative after the transfer of financial share to the provinces within the framework of the NFC Award and by fulfilling the obligations of service of the debt.

“We started from negative 600 billion rupees and then the defense of the country, subsidies, the functioning of the civil government, including salaries and pension obligations, were covered by loans. He also said that some public enterprise (EP) obligations were not fully met.

He asked that when India could accumulate its foreign currency reserves of $600 billion and even Bangladesh surpassed us, how could Pakistan move forward without making tough decisions and for how long the country would continue to beg with multilateral creditors and bilateral friends?

The minister said Indonesia had banned the export of palm oil, adding that Prime Minister Shehbaz Sharif had spoken with the Indonesian president. Palm oil prices in the international market have reached $1,600-1,700 and the government has now earmarked Rs 20 billion for oil seed development. With increased land area, Pakistan could save between $750 million and $1 billion in valuable foreign exchange earnings by producing local palm oil.

He said tightening tax policies would cause pain and the bitter pill would have to be swallowed by the wealthy classes to pay an increased share of taxes. He said zero load shedding was not possible in June because 21,000MW was the maximum the power plants could generate, while an oil-fired plant in Jamshoro was producing one unit at a cost of Rs.59.

Asked about the allocation of 70 billion rupees to the SDGs programme, executed through parliamentarians, the Minister said that the program had also secured funding in the outgoing fiscal year and that small projects helped to increase GDP.

He said the Pakistani government Tehreek-e-Insaf (PTI) had provided fuel and electricity subsidies in violation of the IMF agreement, while the government needed to take tough action. “This year’s budget also reflects the government’s intention to avoid a situation like Sri Lanka’s. This nation will never forgive those who preferred political gains to the detriment of the national economy,” he added.

He said former Prime Minister Imran Khan in the last year of his government had taken on more than double the public debt accumulated under the governments of Nawaz Sharif in 10 years of rule. Former Prime Minister Imran Khan took out 80% of the loans that all leaders have taken in the country’s 75-year history, he added.

Miftah said the government is committed to continuing the privatization process, and that two major companies will be privatized immediately while others will be privatized later.

State Finance Minister Ayesha Ghaus Pasha said the philosophy behind the budget was that minimum impact should be transferred to the masses. She said the budget was anti-inflationary because they imposed direct taxes on the wealthy classes. She said the government could not change global commodity cycles, which were seeing an unprecedented rise in world prices. “Our hands and feet are tied in such a difficult situation,” she said, adding that the government had provided relief through targeted grants. She said all daily use items, including atta, ghee and sugar, would remain available at Utility Stores Corporation (USC) outlets throughout the year.

APP adds: Finance Minister Miftah Ismail openly offered all litigant businessmen to withdraw their cases as the government is ready for the out-of-court settlement as part of its ease of doing business measure . “I propose to all businessmen and institutions in Pakistan that the government be ready to withdraw all pending cases from the FBR (Federal Board of Revenue) and courts if they are also ready. Let’s sit down together in the CCRA and solve them within two or three months,” the minister said while answering a question during the post-budget press conference.

Meanwhile, Miftah told a British news agency in an interview that Pakistan would request a deferred payment plan for liquefied natural gas (LNG) purchased under long-term agreements with Qatar.

“We talked about a deferred payment plan…or at least I asked for that…and the (Pakistani) oil minister is conducting negotiations and is going to conduct talks,” he said.

As it waits for funds from the IMF, cash-strapped Pakistan faces dwindling foreign exchange reserves, sufficient for less than 45 days of imports, and a huge current account deficit – the purchases of dominating its record import bill.

Oil Minister Musadik Malik, who was in Doha this week for talks with Qatari Minister of State for Energy Affairs and Managing Director of Qatar Energy, Saad al-Kaabi, confirmed the talks but said his government was exploring different large-scale “innovative” pricing and sourcing strategies. based talks.

“A deferred payment would obviously be hugely beneficial to Pakistan in terms of cash flow, but that’s not the only discussion we have,” Malik said in an audio message, calling the talks “preliminary.”

The Qatari government did not immediately respond to a request for comment.

Miftah said his government was also talking to Qatar about a new five- or 10-year LNG supply deal for three monthly cargoes, as well as an additional cargo under an existing deal.

Pakistan already has two long-term supply agreements with Qatar – the first signed in 2016 for five shipments per month, and the second in 2021, under which Pakistan currently receives three monthly shipments. Miftah said two other long-term suppliers were unable to meet their contractual supply obligations to Pakistan.