The Ministry of Finance admitted on Tuesday that it had proposed amendments to the petroleum ordinance to increase the levy to Rs60 per litre on all petroleum products.
“We have proposed the amendment to increase petroleum levy rates from Rs50 per litre to Rs60 per litre,” said Noreen Bashir, Joint Secretary Budget, Ministry of Finance, while responding to a question in a meeting of the Senate Standing Committee on Finance.
She said that once the ceiling was proposed to be enhanced from the current Rs50, the government could increase the rate to Rs60 per litre.
A week ago, The Express Tribune had reported that the government would propose an amendment to jack up the levy by an additional Rs10 to collect around Rs870 billion during fiscal year 2023-24.
However, Finance Minister Ishaq Dar has repeatedly said that the government has no intention to increase the levy to Rs60. In case the government does not increase the rate, the target of collecting Rs870 billion will become unrealistic. Under the Petroleum Levy Ordinance 1961, the government can charge a maximum tax of Rs50 per litre on diesel and petrol. It has already exhausted the limit. It has now proposed an amendment to Section 7 of the Petroleum Products Ordinance 1961 through the Finance Bill 2023. The amendment is aimed at taking the power of increasing the levy from parliament and giving it to the federal cabinet.
“The proposed amendment suggests that the government wants to clip the powers of parliament,” remarked Senator Saleem Mandviwalla, Chairman Senate Standing Committee on Finance. The increase in petroleum levy is part of government’s plan to generate approximately Rs2.9 trillion in non-tax revenue in the next fiscal year, beginning July.
Non-tax revenue is not shared with provinces and the federal government is increasingly relying on these sources to fund its expenditures.
Petroleum prices may remain high in the next fiscal year as the central bank has estimated an average exchange rate of Rs308 to a dollar.
In the current fiscal year, the government had set the target of collecting Rs855 billion through the petroleum levy. However, during the first nine months, the collection reached only Rs362 billion. The standing committee opposed the amendment to the petroleum ordinance through the Finance Bill, which only gives voting rights to the National Assembly.
Ministry of Law additional draftsman Jam Aslam pointed out that parliament had also amended the Petroleum Products Ordinance in 2022 through the Finance Bill but it was never challenged in courts. Minister of State for Finance Dr Aisha Ghaus Pasha argued that the purpose of the amendment was only to get enabling powers to increase the levy at a suitable time.
But the joint secretary budget said that the finance ministry was proposing to increase the rate to Rs60 per litre. The standing committee approved the insertion of a new clause 146-D in the Income Tax Ordinance, which would empower the Federal Board of Revenue (FBR) to recover taxes even in cases where it did not have any direct claim.
Sources said that the amendment was being proposed to recover wealth tax which the Ministry of Finance was going to impose as a levy. Similarly, the new law can be used to recover petroleum levy arrears of roughly Rs50 billion from an oil refinery which is refusing to pay the amount.
The standing committee rejected the insertion of Section 99-D, which the government had introduced in the bill to recover tax on windfall profits of exporters, insurance business, oil and gas exploration companies and banks.
The proposed bill states that for any of the preceding five tax years from tax year 2023 and onwards, in addition to any tax charged, paid or payable under any of the provisions of the ordinance, an additional tax shall be imposed at 50% rate on every person who has any income, profit or gains that have arisen to any person or class of persons due to any economic factor or factors that resulted in unexpected income, profits or gains whether or not disclosed in financial statements.
The FBR has also proposed amendments to the schedules which deal with the income of banks, insurance companies and oil and gas exploration companies, showed the Finance Bill.
Published in The Express Tribune, June 14th, 2023.
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