Home Latest News Shaukat Tarin Rebuffs Fears of Inflation After ‘Mini-Budget’

Shaukat Tarin Rebuffs Fears of Inflation After ‘Mini-Budget’

by Newsweek Pakistan

Photo courtesy PID

Finance minister claims only Rs. 2 billion of new taxes will impact common man, while rest is targeting country’s ‘elites’

Finance Minister Shaukat Tarin on Thursday defended the Finance (Supplementary) Bill, 2021 he presented to the National Assembly, claiming that the tax exemptions being withdrawn primarily benefit the country’s “elite” and will not place undue burden on the common man.

“Elites, not the common man, are beneficiary of these exemptions,” he said, adding that tax exemptions equal to Rs. 343 billion had benefited various groups for the past 70 years. “We have targeted only those items which are used by the elites,” he claimed even though he admitted that raising the general sales tax to 17% on several essential commodities would place a burden of Rs. 2 billion on the average citizen.

Tarin claimed the sales tax being imposed on machinery and the pharmaceuticals sector was adjustable and refundable and would not impact prices. As such, he claimed, this was not a “new tax.” He said levying 17 percent sales tax on several hundred items that directly or indirectly affect people would raise around Rs. 71 billion in revenue.

On the withdrawal of tax exemptions, he noted it included Rs. 31 billion on luxury goods and Rs. 31 billion on business goods.

Under the finance bill, several products described as “luxury items” by the government now have 17% sales tax imposed on their import. These include live animals, steak meat, fish, vegetables, high-end bakery items, branded cheese, imported sausages, high-end cellphones and bicycles. He stressed that several of the items that had their tax withdrawn would be provided to the impoverished through targeted subsidies, including oilcake, animal feed, poultry feed, maize seed (for corn oil) and cottonseed.

According to finance minister, the newly taxed items that would impact the average citizens include personal computers, sewing machines, matchboxes, iodized salt, red chilies and contraceptives. He said the government was retaining tax exemptions on basic food items such as the import and supply of rice, wheat, muesli, and local supply of other grains. Similarly, local fruits, vegetables, beef, mutton, poultry, fish, eggs, sugarcane and beet sugar would continue to be exempt, as would locally produced milk and fat-filled milk.

Exemptions, said Tarin, would also continue on vegetables and fruits from Afghanistan, as well as educational textbooks, stationary items and locally manufactured laptops and personal computers. However, imported magazines and fashion journals would now be charged at 17% GST.

The finance minister claimed that the new taxes on pharmaceutical firms considered them as exporters and would allow them to avail refunds within 72 hours on packaging material, utilities, etc. This, he claimed, would see the price of medicines come down in the retail market by 20 percent.

Accusing the opposition of “politicizing” the finance bill and the State Bank Pakistan autonomy bill, he said the facts did not support their condemnation. Claiming the PTI’s manifesto had always called on institutional autonomy, he said the SBP bill would help the overall growth of the country’s economy.

He also clarified that the SBP autonomy bill had been approved with a simple majority, and as such could be amended or annulled later if the government felt it was not delivering as expected. He claimed the main purpose of granting autonomy to the central bank was to end government borrowings, adding the incumbent government had not borrowed anything from it over the past two-and-a-half years. “Besides, there will be an SBP board appointed by the government to make key decisions, while the State Bank will be answerable to the standing committees of Parliament too,” he added.

“The agreement with the IMF is not just a matter of $1 billion,” Tarin said, explaining that the revival of the loan facility would help the government avail loans from other lenders and secure financial assistance.

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