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Govt may slap flood levy ranging from 1-3% on all imports

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  • Govt also considering windfall tax on lofty profits in banking sector.
  • Drops proposal to jack up CVT on luxury, imported vehicles.
  • Govt to grant exemption on import of essential food items.

ISLAMABAD: The government may impose a flood levy ranging from 1-3% on all imports through a presidential ordinance keeping in consideration a waiver to basic food items and raw medicine material imports, The News reported Wednesday.

The government is also considering a windfall tax on lofty profits in the banking sector. The profit earned by the banks in the form of alleged currency manipulation is being bifurcated by the taxation authorities with normal income to impose the additional tax.

Another proposal to jack up the capital value tax (CVT) on luxury and imported vehicles has been dropped by the government. 

The International Monetary Fund (IMF) also opposed the amnesty scheme for the regularisation of vehicles registered in Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) since 2018, when these districts merged into Khyber Pakhtunkhwa.

Official sources confirmed to The News that the State Bank of Pakistan (SBP) had reported lofty profits of Rs100 billion by commercial banks in the first three quarters (Jan–Sept) of the current calendar year 2022, compared to Rs37 billion in the same period of the last year 2021. 

The SBP data showed that the banks had earned Rs63 billion in extra profits. So a windfall tax is under consideration to get the due share for the national exchequer.

Citing the example of energy companies that earned lofty profits in the aftermath of the Russia and Ukraine war, the Western world slapped a windfall tax and the same happened in the case of the banking sector in Pakistan.

“We are also considering the windfall tax cautiously,” said one official, who added that the litigation on the super tax in the superior judiciary was underway, so the government wanted to move ahead in a manner that it might not be struck down by the courts.

“There is also a need to ascertain the exact level of windfall profits after excluding the normal increase in profits of banks,” said the official, who added that it would be hard to declare the whole extra profit of Rs63 billion as part of the windfall profit of banks.

There is a need to calculate the windfall profits of banks carefully, so it is assumed that the commercial banks had earned an extra profit in the range of Rs50 billion, and this amount should be taxed as windfall tax.

There are different rates under consideration, and the government will finalise it if this proposal gets approval from all relevant forums in the coming few days. 

The government is likely to issue an ordinance to that effect to appease the IMF and pave the way for a staff-level agreement to be reached within the next month.

Finance Minister Ishaq Dar is expected to meet the IMF delegation on the sidelines of a donors’ conference, which will be held in Geneva on January 9, 2023, to rally financial support for the flood-affected areas in Pakistan.

On the proposed flood levy, the sources said that the government would grant an exemption on the import of onions, tomatoes and other essential food items, as well as medicines and their raw materials, but a levy in the range of 1-3% will be slapped on all other imported items. 

This revenue measure will fetch Rs60 billion in the remaining six months of the current fiscal year.

The Federal Board of Revenue of Pakistan has been currently busy identifying those sectors that had earned lofty profits in the last fiscal year like banking and beverage. 

It is yet to be seen how the government decides to take action to fetch the additional tax and non-tax revenues to satisfy the IMF and revive the stalled programme.

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Changes in the US dollar’s value are directly correlated with variations in gold prices.

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The price of 24-karat gold in Pakistan increased by Rs1500 on Thursday, reaching Rs231,000 per tola. This was another jump in the price of gold in the country.

Dealers reported a comparable surge in the price of 10 grams of 24-karat gold, which is currently trading at Rs198,045 after rising by Rs1285. In addition, the cost of ten grams of 22-karat gold increased significantly, trading at Rs 181,541.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

At Rs2,580, the price of 24-karat silver remains steady right now. The price of gold increased significantly on a global scale as well, rising by $14 to $2,214 per ounce.

It’s critical to understand that changes in the worldwide market can have a substantial impact on gold prices in Pakistan throughout the day. The gold rates that are offered are obtained from reliable sources, mostly situated in Karachi and Multan.

It is recommended that individuals seek the advice of nearby gold merchants and jewellers for the most precise and current information regarding gold prices.

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Pakistan pledged to finish building the TAPI gas pipeline.

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The minister discussed the importance of the TAPI gas pipeline project for Pakistan’s energy needs during a meeting with Turkmenistan’s ambassador to Pakistan, Atadjan Movlamov.

The Minister was congratulated by Ambassador Movlamov on taking office and his commitment to the project was noted.

Dr. Musadik Malik thanked the ambassador for his kind words, acknowledged the support, and promised to maintain the two nations’ friendship. The intergovernmental commission and working group meetings for the project this year were briefed by Atadjan Movlamov.

He invited the Minister to attend the Turkmenistan Energy Forum, which would take place in Paris the following month.

TAPI undertaking
The project is for the construction of a 1,680-kilometer pipeline with a 56-inch diameter that can carry 3.2 billion cubic feet of gas per day (bcfd) from Turkmenistan through Afghanistan and Pakistan to the border between Pakistan and India.

According to the terms of the TAPI agreement, Afghanistan would receive its portion of 0.5 billion cubic feet of gas per day, while Pakistan and India will each receive 1.325 billion cubic feet of gas per day.

In order to carry out the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pakistan and Turkmenistan inked a cooperative implementation plan in Islamabad on June 4.

Prime Minister Shehbaz Sharif and a delegation from Turkmenistan, led by Minister of Energy and Water Resources Daler Juma’a, were present at the ceremony.

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The price of gold is still rising in Pakistan.

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According to the All Sindh Sarafa Jewellers Association, the cost of 10 grams of 24 karat gold grew by Rs. 86 to Rs. 196,760 from Rs. 196,674, while the cost of 10 grams of 22 carat gold jumped to Rs. 180,363 from Rs. 180,284.

The price of silver per tola and ten grams stayed at Rs. 2,211.93 and Rs. 2,580, respectively.

According to the Association, the price of gold on the global market rose by $7 to $2,200 from $.2,193.

It is important to note that Pakistani and IMF personnel have agreed at the staff level on the second and final review conducted as part of Pakistan’s Stand-By arrangement.

The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the second and final review of Pakistan’s stabilization program, which is supported by the IMF’s US$3 billion (SDR2,250 million) SBA Agreement. This is according to the official statement released by a team led by Nathan Porter.

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