Miftah Ismail, former finance minister and co-founder of the newly launched Awam Pakistan Party (APP), stated on Monday that it is feasible to eliminate taxes on electricity in a “fiscally responsible” way if the government is committed to providing relief to citizens. He suggested that the revenue loss from removing these taxes could be compensated by cutting funds allocated to the Public Sector Development Programme (PSDP).
In a detailed post on X (formerly Twitter), Ismail explained that reducing electricity taxes could be achieved without affecting the primary surplus and total deficit figures. He also noted that this approach would likely be acceptable to the International Monetary Fund (IMF).
Ismail highlighted that the government imposes 24% tax on domestic electricity bills, 37% on commercial bills, and 27% on industrial bills. The taxes include an extra tax, further tax, sales tax (18%), and advance income tax, which is 7.5% for domestic customers, 12% for commercial consumers, and 5% for industrial customers. He reported that the total revenue from these taxes last year was Rs388 billion, with an expected increase to Rs450 billion this year.
Ismail also pointed out that provinces charge an additional “electricity duty” on top of these taxes. He proposed that reducing electricity taxes for the entire year would cut tax revenues by Rs450 billion, resulting in Rs265 billion less for the provinces (which he claims have sufficient funds) and Rs185 billion less for the federal government.
He urged the federal government to lower PSDP expenditures by Rs185 billion to offset this loss, suggesting that if the government reduced PSDP funds from this year’s approved Rs1150 billion to Rs965 billion, it could eliminate all electricity taxes.
Ismail criticized the government for taxing the salaried class and professionals heavily, arguing that it would be a missed opportunity if they did not adopt his proposed solution.
