FM urges PM to exclude employees posted abroad from taxes

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Fears taxes can ‘paralyse’ Pakistan’s missions abroad

Zubair Qureshi
Islamabad

Foreign Minister Bilawal Bhutto Zardari in a letter addressed to Prime Minister Shehbaz Sharif has called for immediate suspension of the implementation of taxes on allowances and perquisites to the employees of the Foreign Ministry posted abroad.

The FM also sought revision of the memorandum of June 19, 2022 regarding the executive allowance to include the officers of the Foreign Affairs Ministry.

Bilawal termed the Finance Ministry’s decision to exclude the Foreign Service of Pakistan from a 150pc executive allowance as “discriminatory and beyond any logic” and expressed fears that the taxes could “paralyse” his ministry.

The government on the other hand has remained non-committal to restoration of income tax exemption for Pakistani diplomats posted abroad saying it was a condition to be fulfilled as per the commitment with International Monetary Fund.

A day earlier Finance Minister Miftah Ismail and Foreign Minister Bhutto met to find solution but their meeting remained inconclusive.

“The issue of restoring the income tax exemption for Pakistani diplomats posted abroad will be taken up with the IMF, as the government cannot do it without the consent of the IMF,” said a senior official of Finance Ministry.

A Finance Ministry handout issued after the meeting stated that “various financial issues related to Pakistan’s Missions abroad and Ministry of Foreign Affairs were also discussed during the meeting” between Bilawal and Miftah, which was also attended by the minister of state.

In the Budget 2022-23 the government withdrew the income tax exemption on payment of any allowance or perquisite paid or allowed to Pakistani employees posted abroad. The annual cost of the exemption is Rs1.035 billion in fiscal year 2022, according to the Federal Board of Revenue.

“Enforcing this tax is tantamount to virtually paralysing a premier institution of the state,” the foreign minister said in the letter addressed to the prime minister. Bilawal said that it was surprising that instead of granting the much-needed upward revision of allowances, a tax had been imposed that significantly reduced even the current level of these allowances.

Pakistani employees posted abroad get various allowances and perquisites for house rent, education fees and other purposes. Before the budget, these allowances were exempted from the income tax. But under the IMF deal these allowances were made part of the taxable income.

Prime Minister Shehbaz Sharif had set up a committee that would take the decision about the income tax exemption and executive allowance. FBR Chairman Asim Ahmed had also been made member of the committee.

“For the first time since 1947, income tax has been imposed on allowances and perquisites of all officers and officials posted at Pakistan missions aboard in the Finance Act 2022 by parliament on June 30,” Bilawal wrote to the Prime Minister Shehbaz Sharif.

He further stated that taxing the allowances and perquisites that were meant to ensure “financial solvency of our diplomats and their representational status will shift the focus of our personnel abroad from work to survival.

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