The government has agreed with the International Monetary Fund (IMF) to implement additional taxation measures totaling Rs. 180 billion in fiscal year 2022-23 (FY23), including a Rs. 60 billion Federal Excise Duty (FED) on beverages.
According to the IMF report on the seventh and eighth reviews of the Extended Fund Facility (EFF) extended arrangement, released on Friday, the government has shared contingency tax measures with the fund, including:
- Immediate increase in fuel GST as a precursor to reaching the standard rate of 17%
- Further streamlining of GST exemptions, including those for sugary drinks (Rs. 60 billion) and other unjustified exemptions, such as those for exporters
- Increase FED on Tier I and Tier II cigarettes by at least Rs. 2 per stick, effective immediately, to generate at least another Rs. 120 billion in revenue.
The government has also committed to continuing progress on the track-and-trace system, which will lay the groundwork for additional revenue collection, particularly from tobacco sales.
The authorities also hope to bring the service sector, particularly retailers, into the tax net by making better use of data from taxes collected on commercial connections through electricity bills.
The authorities intend to increase the Personal Income Tax (PIT) base by another 300,000 people by using data on business withholding tax, third-party data, and physical surveys to book new individuals. They will also use data to bring the service sector, particularly retailers, into the tax net (e.g., from tax collected through electricity bills on commercial connections).
The government has also committed to reducing the large stock of income tax refund arrears to Rs. 225 billion by end-July 2022, from Rs. 377 billion as of mid-June (a 70 percent increase over the fiscal year due to slow processing).