The government aims to raise an additional Rs. 60 billion in revenue to mitigate post-flood aftershocks, therefore a mini-budget is likely in the works.
A Presidential Ordinance could be used to levy these fees, keeping the money out of the federal divisible pool and away from the National Finance Commission’s (NFC) awards. Additionally, because the levy is not a tax, it will not be included in the Federal Board of Revenue’s (FBR) collection, according to the Express Tribune.
The Presidential Ordinance’s initial draught is apparently finished and waiting for approval. It might become effective as soon as this Sunday. However, if the government chooses to incorporate the commercial bank windfall income tax in the ordinance.
The Ordinance may also benefit the government’s standing with the International Monetary Fund (IMF), assuming it takes the necessary steps to make up for the enormous revenue gap. Any imported items that are currency-exempted may be subject to the 1-3 percent flood levy, with the exception of those that are exempt under the Vienna Convention or the 5th Schedule of the Customs Act.
In order to make up for a Rs. 100 billion shortfall in the yearly collection target for customs charges, it was originally planned to levy additional customs duties of up to 3 percent. Now, it’s possible that items that aren’t considered luxury goods will be subject to a 2 percent tax. Additionally, a 3 percent tax can be imposed on expensive items.
Relevantly, the FBR postponed its decision on Thursday to impose a windfall income tax on commercial banks that made billions through currency manipulation. As a result, the government’s target for collecting customs duties, which is Rs. 1.150 trillion, may be missed by more than Rs. 100 billion in the current fiscal year.
All commercial banks’ combined foreign exchange revenues are projected to equal between Rs. 100 and Rs. 110 billion in 2022. The tax regulator faces a challenging task in figuring out how much was a result of currency manipulation. The percentage of the banks’ foreign currency profits subject to the windfall tax might reach 40%.
In 2023, banks will be subject to a 49 percent income tax rate, which includes a 10 percent super tax, excluding the windfall tax. Therefore, the rate could drop below 40% if the FBR permits banks to remove expenses from the foreign exchange earnings part, greatly undermining the tax collector’s enormous collection target of Rs. 965 billion by tomorrow, or December 31, 2022.