ISLAMABAD: The federal government is reviewing a mini-budget plan to raise funds for flood rehabilitation, with new taxes likely on luxury goods, cigarettes, cars, and electronic items, according to official sources.
The proposal aims to generate fresh revenue through additional levies on more than 1,100 imported products. The focus is on high-end items, mainly luxury goods consumed by wealthier groups. If approved by Prime Minister Shehbaz Sharif, the new plan would support flood-hit areas while easing the government’s widening revenue shortfall.
Rs50 billion revenue target
Sources revealed that Finance Minister Muhammad Aurangzeb chaired a meeting on Tuesday to discuss options under a proposed Flood Levy Bill. Officials are targeting at least Rs50 billion in revenue through these measures, though exact rates and product lists are still under review.
Among the proposals is a 5 percent levy on costly electronic goods above a certain price level. Another option is a Rs50 tax on each cigarette pack, regardless of brand. However, critics note that such a measure could burden lower-income groups, weakening the government’s claim of taxing only the rich.
For automobiles, the plan considers a levy on cars with engines of 1,800cc and above. These vehicles are already heavily taxed, with industry data showing that taxes make up 30 to 61 percent of their prices.
Revenue challenges continue
The mini-budget talks come after a Rs40 billion tax shortfall during July and August. Officials warn this gap could cross Rs100 billion in September as floods disrupt business activity. Despite some improvement in large-scale manufacturing, the Federal Board of Revenue (FBR) continues to struggle with collection targets.
The government had earlier reduced duties on around 1,150 imported items under an IMF-backed trade plan. Now, it is considering levies equal to the reduced duties, effectively reversing trade liberalisation. Analysts believe this may face resistance from the IMF in upcoming talks.
Planning Minister Ahsan Iqbal said flood damage assessments will be completed within 10 days. He added that rehabilitation efforts are ongoing and accurate data will guide the next phase of relief.
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