September 10, 2023
Banking Pakistan

Govt Drops Schedules To Impose Flood Levy, Tax On Deposits

The government was forced to drop the proposed flood levy on the imports and a one-time tax on bank deposits of the general public after the International Monetary Fund (IMF) and the main stakeholders opposed them.

The extreme steps that the finance ministry wanted to take in an effort to raise billions of rupees in additional revenue on which the federal government would have the exclusive right were viewed as highly regressive in the financial sector.

The government caved in after not only the IMF, but also the commerce ministry and the State Bank advised it against going for the extreme measures owing to their adverse implications on the economy and the banking system.

“The proposals were shared with the IMF during the recent talks [related to the completion of the ninth review of a $6.5 billion loan programme],” highly placed sources told The Express Tribune.

Moreover, the plan to impose the flood levy in the range of 1% to 3% on the imports was in violation of Pakistan’s commitments under the World Trade Organization (WTO) and the General Agreement on Trade and Tariff (GATT).

Initially, the finance ministry had made both the proposals as part of eight to 10 measures that were under consideration for raising Rs170 billion in taxes in four months, having an annualised impact of over Rs500 billion.

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