‘Relief package’: PM Shehbaz announces fixed tax exemption for retailers, end to FCA for 17m people

• Fixed tax exemption to create tax gap of Rs42 billion.
• PM says coalition govt "cannot add further pressure on small traders".
• Agricultural consumers will also be exempt from FCA amounts.

Prime Minister Shehbaz Sharif on Tuesday announced a major relief package for the inflation-burdened nation under which fixed taxes have been abolished for retailers and more than 1.7 million people will now be exempt from fuel charges adjustment on electricity bills.

Addressing the nation from Qatar — where he arrived today on a two-day trip — the premier said that fixed taxes were imposed on the people in the federal budget for the fiscal year 2022-23, announced on June 10, against the intention of the coalition government.

“I have formed a committee to review the fixed taxes imposed on the retailers,” he said.

The move will translate into a tax gap of Rs42 billion, but PM Shehbaz said that the coalition government "cannot add further pressure on small traders".

In a press conference last week, Minister for Finance Miftah Ismail said that the coalition government aimed to collect Rs42 billion through retail taxes, however, after the tax exemption, it would no longer be able to meet the target.

Ismail revealed that the revised target is now Rs27 billion. “To meet the gap, which will be created by the exemption of fixed taxes on small traders, the government is imposing a further tax of Rs36 billion on the tobacco industry,” he said.

Addressing the backlash received in the last two days regarding inflated electricity bills, the prime minister announced that the coalition government, after intense discussions with the International Monetary Fund (IMF), has decided to exempt 17.1 million people from paying excessive amounts charged under fuel charges adjustment for the month of July and August.

“We have been working on the fuel charges adjustment case for the last five days and we have decided to exempt a major chunk of the population from these charges; however, we are yet to take a decision regarding the 13 million people falling under the category of people who consume more electricity,” he said.

He added that 300,000 agricultural consumers with tube wells will also be exempt from the fuel charges adjustment amounts.

PM Shehbaz added Power Minister Khurram Dastgir would hold a detailed press conference on the matter tomorrow (Wednesday).

The announcement by the prime minister follows necessary amendments to the relevant tax laws and the president's nod.

On Monday, President Dr Arif Alvi signed the Tax Laws (Second Amendment) Ordinance, 2022.

According to a statement issued by the President's Office, Dr Alvi gave the approval to the Ordinance on the advice of the prime minister under Article 89(1) of the constitution.

Under the Ordinance, the amendments have been made to the Sales Tax Act 1990, Income Tax Ordinance 2001, Federal Excise Act 2005 and Finance Act 2022.