ISLAMABAD:
The government is considering a mini-budget to raise funds for flood rehabilitation by imposing additional taxes on cars, cigarettes, electronic goods, and a levy on imported items equal to the reduction in regulatory duties made in June.
Sources said the plan targets luxury items used by wealthy individuals as well as more than 1,100 imported goods, with revenue to be collected through a federal levy.
If approved by Prime Minister Shehbaz Sharif, the mini-budget would help bridge the revenue shortfall and generate funds for flood rehabilitation, though most relief and rescue work is currently being carried out by the provinces.
Government sources told The Express Tribune that Finance Minister Muhammad Aurangzeb on Tuesday chaired a meeting to consider proposals that the government might introduce through a Flood Levy Bill.
The quantum of the additional revenues through the mini budget, the rates and the exact goods that will be hit remain undecided, the sources said. The plan, according to some sources, is to raise at least Rs50 billion through the mini-budget, but the final amount could be higher.
The development came on the heels of the Rs40 billion tax shortfall during July-August period, which is expected to widen far above Rs100 billion by the end of this month amif the devastating floods. This will undermine some of the International Monetary Fund (IMF)-related fiscal targets.
The spokespersons for the Ministry of Finance and the Federal Board of Revenue (FBR) did not respond to requests for comments about the government’s plans to impose flood levy.
The sources said that the government was considering a 5% levy on electronic goods beyond a certain price threshold. The threshold is being finalised at the moment, said a source. Likewise, there is also a recommendation to impose Rs50 levy on every packet of cigarettes, irrespective of the brand and the price, said the sources.
The cigarettes are consumed by rich and poor alike and any such levy may dent the government’s possible narrative of collecting money from the rich to spend on the flood-affected population.
Unlike in case of tax that is shared with the provinces, a levy is federal revenue and it does not become part of the FBR collection. But the FBR’s revenue shortfall will be compensated due to increase in the non-tax revenue measures such as flood levy.
During Tuesday’s meeting, the issue of the constitutionality of the federal levy on certain goods was also debated at length, the sources said.
The FBR has been struggling to meet its targets despite large-scale manufacturing growing 9% in July, compared to a year ago, according to the Pakistan Bureau of Statistics (PBS).
There has also been criticism of the government for its inability to rationalise expenditure and its inclination to impose more taxes. The IMF has also recently questioned a new proposal to impose a new municipal tax for building Rs213 billion worth Jinnah Medical Complex in Islamabad.
The sources said that there was another proposal under consideration to impose a levy on the cars beyond a certain engine capacity. The government may hit 1,800cc and above engine capacity cars. The cars are already heavily taxed and the government gets 30% to 61% of the total price in taxes.
Ali Asghar Jamali, the chief executive officer (CEO) of the Indus Motors, said last month that the prices of vehicles were high because of government taxes, which range from 30% to 61% of the total price of the vehicle. Jamali said that the tax component in the case of a small car is 30%, including Rs32,935 of the recently introduced levy on combustion engines.
In the budget, the government had reduced the regulatory duties on about 1,150 items as part of the IMF-guided trade liberalisation plan. Now the Finance Ministry was considering a levy on these goods equal to the reduced rates.
Under the IMF deal, the government cannot reverse the trade liberalisation and it may find it hard to sell the proposal to the IMF during the upcoming review talks. So far, there has not been any real assessment of the damages caused by the floods and the government appealed on Tuesday to avoid speculation.
A meeting of the prime minister’s committee on flood damages was held in Islamabad under the chairmanship of Federal Minister for Planning Ahsan Iqbal. The meeting reviewed the damage assessment of the 2025 floods in detail, according to a press statement.
During the meeting, the provincial governments agreed that a final assessment of flood damages would only be possible once the water receded, it added.
Iqbal said that the damage assessment would be prepared in coordination with the provincial governments. He further stated that a preliminary assessment of flood damages would be completed within 10 days.
Iqbal urged the media to refrain from speculations regarding flood damages, adding that accurate and transparent data would soon be made available. He said that rehabilitation work is under way in the flood-affected areas, while federal and provincial institutions are jointly carrying out relief operations.
The minister said that a comprehensive Post-Disaster Needs Assessment of damages and requirements would be carried out with the participation of international organisations. He assured that all relief measures in the affected areas would be based on accurate and transparent data.
