Regulatory Duties will be enhanced manifold to discourage import of luxury items: Miftah Ismail
Says IMF itself has announced to convene board meeting on 29th August for discussion & approval of Pakistan’s program
ISLAMABAD ( Web News )
Minister for Finance and Revenue Dr. Miftah Ismail Ahmed has announced lifting of ban on import of non-essential and luxury goods. He said the Regulatory Duties (RDs) will be enhanced manifold to discourage import of luxury items. The Finance Minister said the duties being imposed would not let these commodities to enter into Pakistan as finished goods.
This was stated by Miftah Ismail while addressing a press conference at the PTV Headquarters on Thursday.
Miftah Ismail said that after long negotiations and long process International Monetary Fund (IMF) itself has announced to convene the board meeting on 29th August for the discussion and approval of the Pakistan’s program. Miftah Ismail said that we have fulfilled all the prior conditions and have taken all prior actions. He said that IMF was asking for $4 billion funding and now this has been arranged and Saudi Arabia, Qatar and United Arab Emirates (UAE) will provide this money. He said that China has also announced to reroll $2 billion for Pakistan, adding that Saudi Arabia has also said that it will also reroll the upcoming loans. He said that the funding requirement of Pakistan has also been completed. He said that IMF wants lifting of ban imposed by Pakistan on the import of the luxury items prior to the board meeting.
Miftah Ismail said that if we have limited number of dollars and we have to provide bread to the 230 million people then the decision is easy whether we should import the wheat or import the luxury vehicles, or import the mobile phones or pulses, or import edible oil or import home appliances including microwave oven and air conditioners. He said that it is requirement of the international community that there should be no ban on import of things so we are lifting ban on all things but I am going to impose duties and RDs so these things could not come in Pakistan in form of finished goods, adding that we will impose 400 percent or 600 percent duties and RDs in form of sales tax and customs duty.
Miftah Ismail said that if anyone wants to import Rs 60 million vehicle from abroad in Rs 300 million it will be up to him. Miftah Isamil said that we are going to impose Rs 36 billion tax on cigarettes and tobacco. Miftah Ismail said that we have decided to remain in our resources in terms of budget and current account deficit. The finance minister said that the IMF was of the view that Pakistan should have reserves of $16 billion at the end of the current financial year, adding that $4 billion were short and the concerned countries have assured provision of this money to IMF also so the IMF has summoned the board meeting on 29th August to approve the Pakistani program.
Replying a question, Miftah Ismail said that it would be better that the Qatari government should announce details of the package for Pakistan, adding that PM Shehbaz Sharif is also visiting Qatar soon and there is possibility that some announcement will also be made.
In response to a question, the finance minister said the duties would be increased on completely built unit (CBU) cars and appliances, imported meat and salmon and other luxury items. The government’s purpose was not to encourage the import of such items but to comply with the International Monetary Fund’s (IMF) conditions and other international agreements while limiting imports, he elaborated.
“The truth is that even though we had the ban for the last three months, you could still find salmon and sushi in restaurants in Karachi and Islamabad. We will regularise that and impose duties.”
He stressed that the ban was being removed because of the IMF and there was no other reason. “But with the kind of RDs we will impose, I believe imports will remain reduced. If you want to maximise revenue, you impose 50pc RDs. But if you impose 500pc RDs, it means you do not want imports to happen at all.”
He emphasised that there would be no restrictions on industrialists who were importing machinery to manufacture items for export, or on the import of spare parts in small quantities. However, there would be restrictions on industrialists who wanted to import machinery to manufacture items to be sold in the domestic market, he said.
“For automakers, mobile phone manufactures and home appliance manufacturers, the plan of action is that we will allow you to import half of what you used to. Give me time till September to get my head above the water.”
Secondly, the finance minister said the government had complied with the IMF’s condition that it would not give non-funded subsidies. The government had aimed to collect Rs42 billion through retail taxes but it would not be able to meet that target, Miftah Ismail conceded. “Our revised target is Rs27bn and we will be able to achieve this.”
He said the government would pass an ordinance to remove the fixed tax on small traders. However, the variable taxes — 5pc sales tax and 7.5pc income tax — would remain on every trader for the next three months, he said.
After the three months, the variable taxes would remain the same for traders using between one to 50 units of electricity while they would be increased for those whose units were above 50, he added.
“To meet the gap, we are imposing a further tax of Rs36bn on the tobacco industry. The current tax of Rs1,850 per 1,000 cigarettes on tier 2 packs will be increased to Rs2,050 and Rs5,900 per 1,000 cigarettes on tier-1 packs will be raised to Rs6,500. The Rs10 per kg cess tax on tobacco is being increased to Rs380 per kg.”
The minister said the Federal Board of Revenue (FBR) used to impose taxes on subsidised electricity as well in the past, which had now been removed while sales tax on it would be removed through the upcoming ordinance.
“For example, we used to provide electricity to a small consumer for Rs9 per unit while OGRA (Oil & Gas Regulatory Authority) would fix the price at Rs22. So, the FBR would demand sales tax at the price of Rs22 per unit, but we said the tax will not be imposed on the subsidised amount,” he explained, adding that the government would introduce similar measures for gas.
He added that he would address the sales tax imposed on agricultural machinery as well. “It is a very minor thing and will have little fiscal impact.”
He said the country’s exports this year so far were 7-8pc more compared to last year while imports were 18-19pc lower and the trade deficit was around 3pc lower. The money received in the banking system was $600 million higher than last year, he added.
“The pressure on the rupee has ended because of this. It goes up and down sometimes; a breather is needed and profit-taking happens. I expect the [dollar’s] downward will continue. We will continue to live within our means.”
The finance minister said that in the month of August, Pakistan’s stock exchange and currency were among the best performers globally — showing that the government’s plans are working.
Replying a question, Miftah Ismail said that we do everything with the cooperation of Chief of Army Staff (COAS) General Qamar Javed Bajwa, adding that if army chief telephones someone then it is our own and Pakistan’s army. Replying another question, the finance minister said that the tax will be imposed on the cigarettes when the presidential ordinance will be issued regarding the matter.