Govt to introduce two ordinances to impose Rs290 billion taxes

• Under first ordinance, government will abolish income tax exemptions given to various sectors.
• While the other ordinance will focus on the power sector to shore up Rs150 million.
• Officials say bill is not being introduced in parliament due to lack of time.

ISLAMABAD: The federal government is likely to introduce two ordinances which will impose Rs290 billion taxes on the citizens, reported The News on Saturday.

Under the first ordinance, the government will abolish income tax exemptions given to various sectors. 

Geo News citing unnamed sources said that the procedure to introduce a presidential ordinance to abolish the income tax exemption of Rs140 billion has been completed and a summary in this regard has been approved by the federal cabinet.

The officials, privy to the development, said that the summary of the ordinance was approved by the cabinet via circulation, adding that the bill is not being introduced in the parliament due to lack of time.

Read more: Pakistani mobile phone users to pay lower advance income tax

“The federal government has to inform the International Monetary Fund (IMF) before March 24 about the abolition of income tax exemption,” said the sources.

The other ordinance will focus on the power sector as it is an IMF requirement.

The sources say that through the ordinance, power consumers will endure the burden of Rs150 billion surcharge to enable the government to control the spiralling circular debt.

Sources said the government has finalised preparations to bring an ordinance in this regard.

The introduction of the ordinances come as the State Bank of Pakistan (SBP) announced the policy rate will be maintained at 7% in a bid to support economic recovery.

Read more: State Bank of Pakistan decides to maintain policy rate at 7%

The decision was taken at a meeting of the Monetary Policy Committee (MPC) on Friday, following which a statement was issued by the central bank. The committee noted that the "current stance of monetary policy remains appropriate to support economic recovery while keeping inflation expectations well-anchored and maintaining financial stability".

The SBP said that the committee reviewed the recent rise in inflation and concluded it was "primarily driven by supply side factors and saw little signs of demand led inflation". 

The MPC expects that as this "temporary increase in inflation", that is a by-product of "administered prices" subsides, "inflation should fall to the 5-7% target range over the medium-term".

It said that in the absence of "unforeseen developments", it is expected the monetary policy settings to "remain broadly unchanged in the near term". The MPC foresaw that as economic recovery stabilises and makes a return to full capacity possible, the policy rate in the future will be "measured and gradual to achieve mildly positive real rates".