IN a serious move to fulfil the IMF conditions for securing release of $500 million tranche, the government has decided to implement the withdrawal of corporate tax exemptions and putting in place a mechanism for automatic electricity power tariff increases.
It will be done through passage of two ordinances. The first ordinance will abolish income tax exemptions given to various sectors whilst Rs 150 billion surcharge will be slapped on power consumers through the second one to rein in circular debt.
In our view, these steps will only add to the woes of common man and lead to further price hike.
As regards withdrawal of tax exemptions is concerned, one fully supports the government efforts towards widening the tax base but sometimes exemptions become imperative to uplift a particular sector.
Over the last seven months, large scale manufacturing has witnessed a robust and record growth never seen before.
Whilst the government’s focus is on taking the country towards industralization, withdrawing the corporate tax exemptions will only have a negative impact on the industries especially it will discourage the new entrants.
Also given the third wave of Covid-19 which is proving more fatal, the government must reconsider this decision.
Supporting the industries at this critical juncture is important to keep the economy afloat. Then imposing the power surcharge on the consumers is really not justifiable.
Already the power prices are on the higher side and people find it difficult to pay their bills.
Further increasing the power prices will multiply their problems as it will also trigger a new wave of inflation.
Ever increasing circular debt indeed is a major problem in the energy sector and it speaks volume of the negligence of successive governments of doing nothing to address it.
Instead of putting burden on the consumers, the government should come up with a clear strategy to address this issue. Recovery of bills is one of the most formidable challenges.
One of the suggestions may be to create stakes of the provinces by giving ownership of distribution companies as part of partnership in corporate entities that would in return be responsible for law enforcement as part of the campaign to recover unpaid bills as well as controlling theft in their respective provinces.
Before moving ahead to meet the IMF conditions, the government must not forget that the people are already perturbed due to soaring prices of essential commodities.
Since the economic situation stands much improved, it must now extend relief and take steps that improve the economic growth.