Inflation to worsen as IMF asks Pakistan to slap Rs1300 billion taxes

The nation should now brace itself for yet another onslaught of inflation as the International Monetary Fund (IMF) has asked the newly elected government to levy more indirect taxes of Rs1300 billion on the people, reported 24NewsHD TV channel on Monday.  

The Fund has asked the government to impose 18 per cent General Sales Tax (GST) on different products, including food items, medicines, petroleum products and stationery.

If the government accepts these demands, then wheat, rice, pulses, stationery and petroleum products will become more expensive.

The international money lending organization has estimated that the rationalization of GST rates could generate revenues of 1.3 per cent of the Gross Domestic Product (GDP), equivalent to Rs1,300 billion in the national kitty.

However, the IMF has not yet made any assessment about how much this indirect taxation would fuel inflation in the months to come.

The lender is asking for the elimination of all zero ratings under the Fifth Schedule except for exported goods, and restriction of exemptions under the Sixth Schedule.

It has also asked for removing reduced rates under the Eighth Schedule and to bring all goods to the standard GST rate except a small number of essentials such as food staples and vital education and health items, to be taxed at a single reduced rate of 10%.

“In totality, the IMF has asked removing all compliance related distortionary tax policy changes which include eliminating the minimum taxes and surtaxes as well as removing the Ninth and Tenth Schedules,” the report stated.