Pakistan raises tax on high-octane oil by 40%

Pakistan government has increased the tax on high-octane blending component (HOBC) by 40%, effective March 29, as part of measures to bolster revenues and reduce subsidies.

According to a notification seen by Nukta, the tax rate on HOBC has been raised to PKR 70 per liter from PKR 50 per liter.

Nukta reported last week that affluent individuals in Pakistan have been paying less in taxes compared to the salaried and middle-class citizens. The latter face a higher tax burden, including PKR 70 per liter on petrol for their two-wheelers.

Data indicates that approximately 10,713 million liters of petrol are consumed annually in Pakistan, while the consumption of HOBC stands at around 297 million liters.

Sources say the International Monetary Fund (IMF) has urged the government to eliminate subsidies across all sectors, improve tax collection, and address disparities in taxation.

Tax revenues under the petroleum development levy (PDL) amounted to approximately PKR 718 billion in eight months when the tax on petrol and diesel was PKR 60 per liter and the tax on HOBC was PKR 50 per liter. However, during a recent fortnightly review, the government raised the PDL on petrol to PKR 70 per liter, while the HOBC rate remained unchanged.

The previous increase of PKR 10 per liter was projected to boost tax revenues by PKR 4 billion to PKR 6 billion monthly. With the latest hike of PKR 20 per liter, bringing the HOBC tax rate to PKR 70 per liter, the government expects additional monthly revenue of around PKR 500 million. Before this increase, annual tax collections were approximately PKR 14 billion.

The government has set a target of PKR 1,281 billion in PDL revenue for the current fiscal year, up from PKR 1,019 billion collected during the previous fiscal year.