ISLAMABAD: Pakistan has assured the International Monetary Fund (IMF) that at least three provinces are ready to amend their laws to increase the agricultural income tax rate to 45 percent. Sindh has linked the approval to the implementation of the law by Punjab first.
During the ongoing talks, the IMF has also asked Pakistan to share information on idle capacity payments made to all power plants over the past five years. This is aimed at assessing the real positive impact of the government’s drive to renegotiate energy contracts related to the price of electricity.
The IMF has also stressed on renegotiating Power Purchase Agreements (PPAs) to reduce the price of electricity for end users.
According to Pakistani sources, the IMF has asked to share actual payment figures for the last four years and expected idle capacity payments for the current fiscal year.
It may be recalled that the government has already terminated five power purchase agreements and is reviewing agreements with 18 more power plants. The government has also been criticized for protecting bureaucrats who are in cahoots with power plants.
Last week, Special Assistant to the Prime Minister on Energy and Co-Chairman of the Energy Task Force Muhammad Ali had said in a statement to a parliamentary committee that the federal government expects to save up to Rs300 billion annually by renegotiating or terminating the agreements with IPPs.
According to sources, out of the Rs51 per unit cost, Rs18.5 per unit is the cost of idle capacity, while Rs16 per unit included in the price is a cross-subsidy that the government forcibly collects from high-category consumers to provide cheap electricity to consumers up to 200 units. Removing this cross-subsidy charged to residential and commercial consumers could yield 800 percent more benefits than renegotiating energy deals.
On the other hand, the IMF has separately briefed the provincial governments on the status of provincial fiscal affairs and the implementation of the IMF’s condition regarding increasing the agricultural income tax rate to 45 percent.
Referring to these meetings, sources said that first Punjab and then Balochistan assemblies will pass the law. The Khyber Pakhtunkhwa assembly will pass the law only after the Sindh assembly passes it.
According to sources, Sindh has linked its approval to the implementation of the Punjab assembly law. The provinces are worried that Sindh will not approve the bill with a 45 percent rate as the provincial government has already spoken out against increasing tax rates to 45 percent in one go.
A draft of the Agricultural Income Tax Bill seen by The Express Tribune proposes that the income tax rate for small companies will be 20 percent and for general companies 29 percent. For individuals, it is proposed to levy 15 percent income tax on farmers with an annual income of more than 6 lakhs to 12 lakhs. Income up to 16 lakhs will be taxed at the rate of 20 percent. Income up to 32 lakhs will be taxed at the rate of 30 percent. Income up to 56 lakhs will be taxed at the rate of 40 percent. The tax rate for farmers with an annual income of more than 56 lakhs will be 45 percent.
Similarly, landowners with an annual income of 15 crores to 20 crores will pay a one percent super tax. Landowners with income up to Rs 2.5 million will pay 2% super tax, those with income up to Rs 300 million will pay 3%, those with income up to Rs 400 million will pay 6%, those with income up to Rs 500 million will pay 8%, and those with income above Rs 500 million will pay 10% super tax.
