Tarin rules out new taxes, rupee demonetisation

KARACHI: Shaukat Tarin, Adviser to PM on Finance and Revenue, on Friday ruled out new taxes in supplementary budget as part of International Monetary Fund (IMF) loan deal and pledged to pass on benefit of easing crude oil prices to consumers.

“I want to make it clear that only certain exemptions on taxes will be withdrawn,” Tarin told newsmen after attending a gong ceremony at Pakistan Stock Exchange (PSX).

Heralding that the government had abolished taxes on petrol, Tarin said withdrawal of Rs700 billion worth of tax exemptions paid the way for $500 million tranche from IMF.

“When I assumed the charge of Ministry of Finance, I had categorically made it clear that no new tax would be imposed by not allowing IMF to burden people with additional taxes,” Tarin said.

“This was the reason we didn’t surrender to IMF’s demands to impose new taxes,” the finance adviser said while referring to government’s plan to present mini-budget after staff level agreement with IMF for the release of $1.06 billion under Extended Financing Facility (EEF).

He said IMF’s question as to why Pakistan’s tax system had distortions, carried “some weight’ because some sectors in Pakistan were paying 17 percent sales tax, while some were exempted from it.

“Take the sales tax and then give it as targeted subsidy to vulnerable segments,” said Tarin quoting the IMF officials as saying during the staff level meetings.

The finance adviser admitted rupee was undervalued by Rs10 presently; however he lashed out at elements, who had been speculating on exchange rate movements. “First, devaluation of rupee was being attributed to the stalled loan deal with IMF and when it was struck another argument arose suggesting ‘benchmark is real effective exchange rate’,” he pointed out.

“When rupee is compared with the currencies of trading partners and competitors, then it is said a specific currency should be at a certain level and in Pakistan’s case, experts believe it should be around Rs167-167 versus one US dollar.”

He also dispelled reports rupee would be demonetised and ruled out any steps that harmed businesses confidence or created distortions in the market.

“We are taking some steps because of which rupee will go on the other side. They (speculators) will be badly defeated so don’t get into this kind of speculation. Rupee will move on both sides,” he said.

On fertiliser industry, the adviser said the government provided subsidised gas to the sector and also did not impose any tax on them.

“The combined subsidy provided to the fertiliser-makers is around Rs150 billion,” he said.

Earlier, speaking at a gong ceremony to mark the Pak Agro Packaging Limited (PAPL) listing on Pakistan Stock Exchange (PSX)’s Growth Enterprise Market (GEM) Board, Tarin emphasised the need to rationalise tax incentives to boost investment inflows in the right avenues.

“We want to see investment in this country in productive sectors. While I am not against the real estate sector as it benefits the economy and supports around 40 other industries as well as creates employment, we have to make sure the benefits to this sector are aligned with those given to other productive sectors,” he said.

Finance adviser noted, “We do see an anomaly in the real estate sector when plots of land are bought and are held for years.

“That is productive capital sunk,” he added.

Tarin announced the government would introduce certain tax scheme that would be applicable to these assets so the money could be recycled to the other sectors of the economy as well.

“We are also approving REIT listings which will benefit the capital market. Additionally, we are in favour of listing of SOEs which are currently encumbered by the circular debt phenomenon. This has choked some of our public sector entities, especially in the energy sector”, Tarin said and added, “We are, however, in the process of unlocking that”.