Pakistan Prime Minister Shehbaz Sharif on Friday announced a 10% “super tax” on large-scale industries like cement, steel and automobiles, a move he said was aimed at tackling spiralling inflation and saving the cash-strapped country from going "bankrupt."
High net worth individuals will also be subject to a "poverty alleviation tax," Mr. Sharif announced after chairing a meeting of his economic team on the federal budget for the next fiscal year 2022-23.
“Our first motive is to provide relief to the masses and to reduce the burden of inflation on the people and facilitate them,” Mr. Sharif said in a video message to the nation.
“Our second motive is to protect the country from going bankrupt," he said, adding that it has been devastated due to the "incompetency and corruption" of the previous Imran Khan-led government.
The sectors on which this “super tax” will be levied include cement, steel, sugar, oil and gas, fertilisers, LNG terminals, textile, banking, automobile, cigarettes, beverages and chemicals, he said.
Stabilising economy
Mr. Sharif explained that other motives included stabilisation of the economy.
“These aren’t just words, this is the voice of my heart and InshaAllah we will be able to achieve all these targets,” he said.
He said history had witnessed that in difficult times, it was the poor people who always made sacrifices.
"Today, it is time for the affluent citizens to do their part. It is their turn to show selflessness. And I am confident that they will contribute fully to play their part," Mr. Sharif said.
He said the institutions whose job is to collect tax should take from the rich and give to the poor.
Those whose annual income exceeds ₹150 million will be subject to 1% tax; for ₹200 million, 2%; ₹250 million 3%; and ₹300 million will be taxed 4% of their income, he said.
Increased tax collection
The government has also pledged an increased tax collection from PKR 7 trillion to PKR 7.4 trillion in the next fiscal year beginning July 1.
Mr. Sharif said teams will be formed to collect taxes after the passage of the budget bill.
The prime minister expressed the hope that “soon Pakistan will come out of the economic crisis and announced to provide relief to the poor segment of society.” He recalled that the government had two options when it came to power — call fresh elections or take tough decisions and tackle the sinking economy.
"It would have been very easy to leave the public in crisis and become silent spectators like others," he explained.
Mr. Sharif made another appeal for a "grand national dialogue" to end the country’s current economic travails.
"It is never too late. Today we have to demolish the walls of poverty, unemployment and hatred. We have to give birth to flowers of love and end thorns. This is only possible through a grand national dialogue and charter of economy,” he asserted.
Meanwhile, the Pakistan Stock Exchange’s benchmark KSE-100 index witnessed a 4.81% drop after Sharif’s announcement.
The premier on Thursday had warned that the country may witness more difficult times as it struggles to steer itself out of the ongoing economic crisis.
Uphill task to revive stalled assistance programme by IMF
Mr. Sharif said that his government faced an uphill task to revive a stalled assistance programme by the International Monetary Fund (IMF) due to the broken promises with the global lender by the previous Imran Khan-led government.
Mr. Sharif, who came to power in April after Khan’s government was toppled through a no-confidence vote, made it a priority to revive the IMF programme as it would unlock several avenues to access loans from different sources.
After many meetings and hiccups, the two sides on Tuesday night reached a broader understanding to restore a USD 6 billion package, providing a much-needed boost to Pakistan's economy.
The premier, however, said that the economic situation would not improve overnight once a deal with the IMF was signed.
"Will prosperity come overnight after an agreement is signed? Not at all, (but) we have to strengthen our financial position,” he said.
