News
May 17, 2024
Carbon Tax on Fuel Proposed to Placate IMF
Islamabad: The government is mulling a move to introduce a carbon tax on petroleum and similar products, amid a push for an integrated general sales tax (GST) from the International Monetary Fund to achieve the true spirit and benefits of the value-added tax (VAT) for documentation and digitization.
Sources told Dawn that carbon tax was one of the measures being deliberated that could also help garner international financial support for newer aid instruments, including green and e-bonds and cheaper loans and grants from multilateral institutions. The future development program is already being aligned with climate public investment management benchmarks, the sources added.
The IMF was advocating a revival of standard GST on petroleum products in addition to up to Rs60/liter petroleum levy as one of its broader program objectives to transform the existing GST scheme with a universal VAT mode of taxation on consumption across the economy with no exception or preferential treatment to any sector.
The authorities, however, suggested the re-introduction of the carbon tax or increasing the threshold for petroleum levy in the coming budget to as much as Rs100/liter for greater revenue generation from petroleum products because its proceeds stay fully in the federal kitty, unlike the GST that overwhelmingly goes to the provinces.
According to sources, the carbon tax was a beneficial initiative for international support and to earn carbon credits and cheaper finances and could then be dedicated to environment-friendly expenditures that replace carbon-emitting practices and contain greenhouse gas emissions. The two non-tax revenues (petroleum levy and carbon tax) would be in place simultaneously in case of a final decision. - Dawn
Courtesy Dawn
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