FM Aurangzeb Warns Retailers to Follow Rules or Face Penalties

Islamabad: Finance Minister Muhammad Aurangzeb announced on Tuesday significant progress toward securing a new International Monetary Fund (IMF) programme, pledging to implement structural reforms aimed at addressing Pakistan's low tax base, energy sector, and state-owned enterprises (SOEs).

During the National Assembly debate on the upcoming fiscal year's budget, Aurangzeb emphasized the government's commitment to making this the last IMF programme for Pakistan by enacting homegrown reforms. These reforms are critical for steering the country out of its current economic challenges, with a focus on increasing the tax-to-GDP ratio to 13 percent, reforming the energy sector and SOEs, advancing the privatisation process, and transitioning to a market-driven economy.

Aurangzeb highlighted the importance of stakeholder input in the budget process, assuring that updates will be provided quarterly. The government has adopted several recommendations from the Senate Standing Committee on Finance, including provisions for non-filers to be heard before implementing SIM blocking and travel bans related to income tax. Additional explanations have been added for the declaration of foreign and dependent wife’s assets. Furthermore, the default surcharge for sales tax, income tax, and federal excise duty (FED) will now be the higher of Kibor+3 percent or 12 percent.

The minister noted that penalties for late income tax filings will be increased for habitual late filers, while maintaining tax exemptions for stationery items and reduced sales tax rates on heavy electric vehicles under the 8th Schedule of the Sales Tax Act. The Export Facilitation Scheme (EFS) 2021 will continue to offer sales tax zero rating on local supplies, and the deadline for transferring sales tax and FED cases to the Appellate Tribunal has been extended to December 31, 2024.

Aurangzeb reiterated the government's priorities in agriculture, health, and education, ensuring protection for these sectors. He also announced a review of tax exemptions for supplies to charitable and welfare hospitals and professors. The Federal Board of Revenue (FBR) will play a crucial role in future reforms, with the Prime Minister overseeing its digitisation and policy changes.

A significant increase in tax rates for non-filers under Sections 236G and 237H will be implemented from July 1, 2024, to bring traders, retailers, and distributors into the tax net. The government aims to reduce unnecessary expenditures and future pension costs by reforming the pension system and federal government size.

A committee led by the finance minister will propose mergers of federal ministries or devolving them to provinces to reduce wastages. Aurangzeb also proposed a fiscal pact, with discussions on sharing expenses of devolved subjects between the federal government and provinces.

Regarding the defence budget, Aurangzeb assured that despite fiscal constraints, all needs of the armed forces will be met to ensure national security. He emphasized the importance of fool-proof security for Chinese citizens in the second phase of the China-Pakistan Economic Corridor (CPEC).

The minister highlighted efforts to revive industrial activity through reduced electricity prices and policy rates. He announced that 81 percent of Public Sector Development Programme (PSDP) resources will be allocated to ongoing projects, with a strong emphasis on public-private partnerships.

Aurangzeb concluded by announcing three basic honorariums for National Assembly and Senate officers and staff. Additionally, the government will tighten regulations on shopkeepers and retailers, with actions starting July 1 for those failing to register with the FBR Tajir Dost Scheme.

NNI adds that the minister's measures are part of a broader strategy to improve economic stability and growth in Pakistan.