For Pakistan’s fuel consumers the Federal Board of Revenue’s recent actions are a case of good news, bad news. That is because while worldwide oil prices continue to fall, Pakistan has been ramping up its fuel tax rates, first in July, then again in August, September, and October. During that time – between July 1st and October 1st of this year – the sales tax on petrol has risen from 17% to 26%, and the sales tax on diesel fuel has risen from 29% all the way to a whopping 50%. There has also been a steady increase in the sales tax rates for kerosene, furnace oil, and high octane blending component over that same period. The effect is that any benefit the Pakistani citizens might have received from the favorable oil market has been wiped out by the taxes they are paying their government.
The government’s actions are understandable, even necessary, when you consider the role that fuel plays in Pakistan’s economy. Roughly 45% of all the sales tax in Pakistan is collected on the sale of fuel products. That means when the price of oil drops Pakistan’s economy becomes vulnerable and the government must raise its fuel tax rates just to break even on revenue.
For copies of the tax rate legislation mentioned in this post, please visit the Federal Board of Revenue’s website, located here: