Hi everyone! I hope you are all doing well. Welcome back to another blog. This article will discuss “Govt Considers Increasing Petroleum Levy”. The government is considering raising petroleum levy rates on fuel products to a record high of Rs. 60 per liter. This is part of their efforts to generate Rs. 2.9 trillion in non-tax income for the fiscal year (FY) 2023-24.
The government is considering an increase to provide more room in the budget for spending. They expect a 30 percent rise in pension payments and civil government operations compared to the previous fiscal year, as reported by Express Tribune.
The Ministry of Finance (MoF) proposes to increase the tax rate by Rs. 10 per liter for the upcoming fiscal year. This adjustment aims to generate approximately Rs. 870 billion in revenue from this source. Moreover, the tax rate stands at Rs. 50 per liter.
The Ministry of Finance is urging an increase in rates due to the anticipation of high petroleum prices in the upcoming fiscal year. Market experts estimate an average exchange rate of Rs. 308 per dollar. The government aims to generate revenue of Rs. 855 billion from the petroleum levy in the current fiscal year. However, only Rs. 362 billion has been collected in the first nine months of FY23.
The State Bank of Pakistan (SBP) generates significant profits, contributing to non-tax revenue. The finance ministry has revised its estimate for this income category to be Rs. 1.1 trillion, an increase from the previous Rs. 920 billion. It’s important to note that non-tax revenues are not shared with the provinces, and the federal government is depending more on them to fund its expenses.
The government might also consider using additional sources, like a tax on wealthy individuals and an extra charge on banks’ unexpected profits, to achieve the target of Rs. 2.9 trillion in non-tax revenue for the upcoming fiscal year. Additionally, the spending on pensions is expected to reach Rs. 780 billion in FY24, which is an increase of Rs. 172 billion or 28 percent compared to FY23. Furthermore, the estimated expenditure for running the civil government is around Rs. 720 billion in the next fiscal year.
Surprisingly, the projected budget deficit for FY24 is approximately 7.4 percent of GDP, amounting to nearly Rs. 7.8 trillion. In contrast, the overall primary budget could display a small surplus. Also, the total budget shortfall might reach Rs. 7.2 trillion or 6.8 percent of GDP.
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