Pakistan Mulls Tax Exemptions for Former FATA Despite IMF Opposition
Federal Government Considers Proposals Amid Ongoing Economic Challenges in the Region
According to sources, the Federal Board of Revenue (FBR) is considering this proposal in the upcoming federal budget. The proposal includes exemptions from income tax, sales tax, and Federal Excise Duty (FED) for businesses operating in the FATA.
Sources said that these tax exemptions are being considered due to the region’s ongoing economic challenges. It is to be recalled that the previous tax exemption for the former FATA expired at the end of 2023.
More to read: Pakistan trade deficit to increase by over $4.16bn in 2024-25: IMF
Also, there is a proposal to establish a check post on the border of the former FATA to ensure that goods are not brought in parts to circumvent the exemptions.
Pakistan’s new budget tightening belts for IMF bailout: Experts
ISLAMABAD: Pakistan’s unveiling of its new federal budget paints a picture of tough economic times ahead. The 18.9 trillion rupee budget, with a massive deficit of 9.8 trillion rupees, reflects the country’s need for an IMF bailout package, potentially worth $8 billion.
According to the economic experts,the budget proposes significant hikes in electricity and gas prices, ranging from 5 to 7 rupees per unit. This, coupled with a projected tax target of 13 trillion rupees, translates to higher taxes on income, vehicles, and even a potential 18% GST on various goods. Economists warn that these measures, while aimed at appeasing the IMF, will likely push inflation beyond the government’s target of 12%.
The proposed budget prioritizes compliance with IMF conditions, potentially at the expense of the middle class. While some relief is offered to low-income earners through programs like BISP, and a pay raise for small government employees, the middle class faces the brunt of tax increases and rising costs of living.
With a significant portion of the budget earmarked for debt interest payments and defense spending, achieving fiscal stability becomes a crucial priority. Experts warn that maintaining the value of the Pakistani Rupee amidst inflationary pressures is essential.
The success of the IMF bailout negotiations and the government’s ability to implement economic reforms will determine Pakistan’s future financial path. As the budget awaits approval, the nation braces for a period of economic hardship.
