The federal government is weighing a plan to introduce a mini-budget aimed at raising funds for flood rehabilitation, which could include new levies on luxury goods, cigarettes, cars, and electronic items, according to official sources.
The plan, currently under discussion, seeks to impose additional taxes on over 1,100 imported items through a federal levy. It is expected to target high-end products mostly consumed by wealthy individuals. If approved by Prime Minister Shehbaz Sharif, the move would help bridge a widening revenue shortfall while generating resources for flood-hit areas.
Rs50 billion target under discussion
Sources told The Express Tribune that Finance Minister Muhammad Aurangzeb chaired a meeting on Tuesday to consider various proposals that might be introduced through a Flood Levy Bill. Although the exact rates and list of targeted goods are yet to be finalised, officials are reportedly eyeing at least Rs50 billion in revenue through the new measures.
One option being studied is a 5 percent levy on expensive electronic goods beyond a certain price threshold. Another proposal suggests a Rs50 levy on every cigarette pack, regardless of brand or price. However, insiders admit such a tax could undercut the government’s narrative of taxing the rich to fund relief for flood victims, as cigarettes are consumed across income groups.
Similarly, the government is considering imposing a levy on cars with engine capacities of 1,800cc and above, which are already subject to heavy taxation. According to Indus Motors CEO Ali Asghar Jamali, taxes account for 30 to 61 percent of a vehicle’s price.
Revenue pressures
The mini-budget discussions come after a Rs40 billion tax shortfall during July and August, which officials fear could swell past Rs100 billion this month as floods disrupt economic activity. The Federal Board of Revenue (FBR) has struggled to meet its targets despite a 9 percent rise in large-scale manufacturing in July, according to the Pakistan Bureau of Statistics.
While the government had earlier reduced regulatory duties on around 1,150 items under an IMF-guided trade liberalisation plan, it is now considering imposing a levy equal to the reduced duties. Reversing trade liberalisation could draw resistance from the IMF during upcoming review talks.
Meanwhile, Planning Minister Ahsan Iqbal said a preliminary assessment of flood damages would be completed within 10 days, adding that rehabilitation work is ongoing and accurate data will guide future relief efforts.
