The government aims to introduce new tax measures for collecting an additional tax of around Rs 400 billion in the Financial Year 2023.
Karachi, June 08, 2022: With higher revenue collection as a key theme, the Federal Budget 2022-23 is likely to announce various tax measures including a ‘Windfall levy’ on corporates earning extraordinary profits and a time-bound additional tax on some sectors.
Also, withdrawals of some tax incentives offered to various sectors will also be considered. The Budget FY23 tabulation is broadly expected to be in line with IMF’s guidance, paving way for the final nod of the Fund to complete the 7th review of the ongoing EFF program, followed by other sizable external flows in the coming months.
The government targets GDP growth for FY23 at 5%, of an already higher growth base of at least 6% for FY22. On the other hand, the fiscal deficit is expected to be trimmed to 5% of GDP.
Taking the path of higher tax collection
The total revenue collection target is up 19% YoY to Rs7.2trn, where out of the absolute jump of Rs1trn YoY the government aims to introduce new tax measures collecting an additional tax of around Rs400bn in FY23.
Various tax measures under consideration include (1) ‘Windfall levy’ on corporate earning extraordinary profits, (2) a time-bound additional tax on banks, steel, edible oil, tobacco, pharma and beverages, (3) changes in tax slabs and rates pertaining to salaried persons and (4) higher import duties on edible oil and luxury items. Albeit, other populist measures such as support to the agriculture and export sectors, jump in PSDP from Rs600bn in FY22 to a target of Rs800bn for FY23, supportive measures for female entrepreneurs etc. are likely to balance the prospective austerity measures.
For the export sectors, it is reported that the government may restore sales tax-free raw material (registered).