Screengrab of P.M. Sharif’s video statement from Qatar
Prime Minister Shehbaz Sharif on Tuesday confirmed the reversal of a fixed tax on retailers—imposed in the federal budget for the ongoing fiscal year—and announced the waiver of fuel adjustment charges (FCA) on electricity bills for 17 million consumers.
In a brief video statement from Qatar—where he is currently on a two-day official visit—the prime minister said the fixed tax regime had been a “mistake,” stressing that he had neither wanted, nor directed, the Finance Ministry to impose such taxation measures on traders. “The fixed tax was imposed against our vision,” he said. “I have formed a committee to fix responsibility for this error,” he added.
Noting that the reversal of the tax had left behind a Rs. 42 billion revenue gap in the budget, he said the government would overcome this through alternate measures and would not create any more difficulties for traders already hit by record inflation. “Traders should not worry about this tax now,” he assured. “It’s been withdrawn,” he added.
The fixed tax had provoked mass protests from retailers across Pakistan, with many lamenting that they were being charged more in taxes than they were paying in rent for their shopfronts. As the protests mounted, Pakistan Muslim League (Nawaz) Vice-President Maryam Nawaz took notice and urged Finance Minister Miftah Ismail to reconsider. Subsequently, Ismail said the government had decided to reverse it, adding that the funding gap would be overcome with a variable tax regime for traders—in accordance with their income—and a hefty rise in taxes on tobacco products.
Acknowledging the government’s focus thus far had been to avoid default, the prime minister said the efforts of the ruling coalition had averted this crisis. However, he admitted, inflation remained a major issue. Referring to mass protests across the country over last month’s electricity bills—which have nearly doubled for many consumers despite utilizing the same or less power consumption as the previous month—Sharif said the government had discussed the issue with the International Monetary Fund (IMF) had decided to exempt 17.1 million consumers from paying fuel adjustment charges for July and August.
“Unfortunately we have to consult over everything with the IMF under an agreement [inked by the previous government]. We thus consulted IMF, PMLN supremo Nawaz Sharif and other coalition leaders and it was decided that 17.1 million electricity consumers should not pay the FCA,” he said. The exemption would also apply to 300,000 tube well users, he added.
“We have been working on the fuel adjustment charges case for the last five days and we have decided to exempt a major chunk of the population from these charges,” said the prime minister. “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, adding that Power Minister Khurram Dastgir-Khan would hold a detailed press conference on the issue today (Wednesday).