The federal government is set to impose 5% to 10% additional regulatory duty on dozens of imported luxury and essential items and will slash development spending by at least 15% as part of an agreement reached with the International Monetary Fund (IMF) during the Dubai meeting recently, a report in the local media said on Saturday.
According to the report, 283 items that are expected to be subject to the additional levy are imported fruits, dairy products, marbles, refrigerators, other electric appliances and wooden furniture, which the government insists are part of luxury products.
The government has assured the IMF that it will apply a combination of expenditure cuts and additional revenue measures to remain within the budget deficit target of 4.9% of GDP. The cut will be applicable only to the development budget, which will be reduced by at least Rs 75 billion, roughly 15%, said the report.
The report said that the decision was taken even though the IMF had allowed the government to lower its tax collection target to Rs 2.691 trillion, which is Rs 119 billion less than the goal set in the budget just seven months ago.
Preparations are under way to levy 5% to 10% additional regulatory duty on cosmetics, imported food items like chocolates, beverages, mechanical and electrical appliances, said a senior official of the Federal Board of Revenue (FBR).
He said that besides the additional regulatory duty, other measures were also under consideration, but a final decision will be taken by Finance Minister Ishaq Dar.
On all these items – 283 of them to be precise – the PML-N government has already slapped 5% additional regulatory duty in the financial year 2014-15 budget, which was announced in June.
The latest move is aimed at generating additional revenues and this time it is not being used as a tool to curb imports, said the officials.
It will be the third such move in the last two months. Earlier, as against the standard sales tax rate of 17%, the government enhanced it to 27% on petrol, HOBC, light diesel oil, high-speed diesel and kerosene in two phases aimed at recovering about Rs 28 billion from the consumers.
In its second move, the government imposed 15% regulatory duty on the import of steel products, billets, bars and wire rods, 5% regulatory duty on cold-rolled coils and galvanised platted sheets, and Rs 200 per set duty on cellphones.
The second step was taken to generate Rs 4 billion in the current fiscal year.
The FBR revenues are falling short of the target due to reduced oil prices, weak enforcement by the tax machinery, politically motivated tax concessions and lax enforcement of existing laws.
In the first seven months of the current fiscal year, the FBR pooled Rs 1.339 trillion, which was just 47.6% of the original target of Rs 2.810 trillion.
