Toned down mini-budget

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THE government on Thursday announced fresh revenue measures of more than Rs50 billion and lifted a ban on all non-essential, or luxury, imports to meet yet another lateral demand of the International Monetary Fund (IMF) before it clears Pakistan’s bailout package later this month.

Giving details of what is being considered as the toned down mini-budget, Finance Minister Miftah Ismail said Rs36bn worth of additional tax had been imposed on cigarettes and tobacco and about Rs14bn would come from changes in the retailers’ tax regime.

He said some of the other proposed tax relief measures for real estate, capital markets, banks and other sectors have been postponed for now.

It is a foregone conclusion that the additional taxes imposed would ultimately be paid by the end consumer and, therefore, these would add to the miseries of some segments of the society.

However, one has to appreciate that the Government finally decided not to impose taxes on the commonly used items and essential services.

The decision to postpone relief measures for influential lobbies is also a step in the right direction and we hope sanity would prevail and the Government would not offer undue relief to those who are not paying their full and due taxes for a variety of reasons and factors.

But removal of the ban on import of the luxury items was unfortunate as it sent wrong signals that the country was no more economically sovereign.

Pakistan is witnessing the worst kind of foreign exchange crisis and it is running from pillar to post to firm up external flows at costs that compound difficulties of the common man.

Therefore, the Government justifiably imposed a ban on luxury items and as a consequence the country was not only able to manage its limited foreign exchange reserves efficiently during the last two months but the move also helped stabilize the local currency.

The Government was obviously forced by the powerful donors to lift the ban fearing non-compliance could create legal problems like punitive action by the World Trade Organization (WTO).

The permission given to exchange companies to export dollars and now lifting of ban on import of luxury goods would increase the demand for dollar and as a result the rupee could again depreciate with further inflationary impact for people of Pakistan.

Loss of economic sovereignty is the cost of our failures to mobilize domestic resources and unwillingness of powerful lobbies and sectors to pay due taxes.

The Government has, however, done well by deciding to regularize imports of luxury items through imposition of restrictive duties to discourage their imports as we cannot afford to waste loaned dollars on luxuries.

 

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