ISLAMABAD: The federal government is weighing a mini-budget aimed at generating fresh revenue for flood rehabilitation, with proposals to impose new taxes on luxury goods, cars, cigarettes, electronic items, and over 1,100 imported products.
Officials said Finance Minister Muhammad Aurangzeb chaired a high-level meeting on Tuesday to review the “Flood Levy Bill,” which could raise at least Rs50 billion, though the final figure may go higher. The levy is designed to offset a widening revenue shortfall that has already touched Rs40 billion in July and August and is projected to exceed Rs100 billion by the end of September, largely due to devastating floods.
The plan suggests targeting wealthier consumers by taxing high-end items and vehicles above 1,800cc engine capacity. Cars are already subject to heavy taxation, with 30% to 61% of their retail price made up of government taxes, industry executives note. Cigarettes, luxury goods, and certain electronics may also face additional duties.
To comply with its IMF programme, the government cannot reverse June’s trade liberalisation move that reduced regulatory duties on over 1,150 items. Instead, the Finance Ministry is considering imposing a new levy equal to the duty reductions. However, selling this idea to the IMF during upcoming talks may prove challenging.
During the meeting, some officials also questioned the constitutionality of such a federal levy. Meanwhile, critics argue the government is relying too heavily on new taxes instead of rationalising expenditures. The IMF has already raised concerns over similar taxation plans, such as the proposed municipal tax for the Rs213 billion Jinnah Medical Complex in Islamabad.
On the humanitarian side, Planning Minister Ahsan Iqbal chaired a separate meeting of the PM’s Committee on Flood Damages, stressing that accurate assessments will only be possible once floodwaters recede. He promised a preliminary report within 10 days, with a comprehensive Post-Disaster Needs Assessment to follow in collaboration with provinces and international partners.
Iqbal urged the media to avoid speculation and assured that relief and rehabilitation operations are under way, guided by transparent data and joint federal-provincial efforts.
