IMF urges Pakistan to tax e-cigarettes to boost revenue

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to impose uniform excise rates on both local and foreign cigarette manufacturers.

According to sources, the IMF has suggested applying consistent excise rates to all domestically produced cigarettes, regardless of the manufacturer’s origin.

Furthermore, the IMF has proposed subjecting e-cigarettes to taxation similar to traditional tobacco products, citing comparable health impacts.

The objective of these recommendations is to ensure equitable taxation across cigarette products, regardless of their source.

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Additionally, the IMF suggests extending the application of the Distorted Production Levy (DPL) tax to include machinery inputs contributing to pollution.

The IMF advises against granting accelerated depreciation benefits for alternative energy projects, aiming to bolster revenue.

To further enhance revenue generation, the IMF proposes gradually increasing excise taxes on domestically produced cards and luxury items, such as yachts.

Moreover, the IMF recommends strengthening border controls to mitigate the smuggling of oil derivatives, especially from sensitive regions.

Looking ahead, the IMF suggests simplifying the tax system by reducing the number of taxed items. This may involve eliminating excise taxes on products lacking negative externalities, significant revenue potential, highly inelastic demand, or luxury characteristics, sources added.

Lastly, the IMF suggests offering prepaid income tax refunds on telecom bills to formal employees paying Personal Income Tax (PIT) as a means of encouraging compliance with tax regulations.