E-DRUG: No VAT on Food and Medicines in Pakistan!
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The Government of Pakistan is all set to introduce Value Added Tax (VAT) in
Pakistan replacing existing system of General Sales Tax (GST). You may find
details about this new tax system on official website of Federal Board of
Revenue (FBR) at http://www.cbr.gov.pk/. Apparently this new tax is a part
of policy actions which government has agreed with the International
Monitory Fund (IMF) as a part of 25-month, US$11.3 billion Stand-By
Arrangement (SBA). The new VAT system will be introduced through federal and provincial legislation and draft laws in this regard have been prepared and posted on the website of FBR. Currently at federal level, this matter is being discussed in relevant parliamentary committee and FBR officials are making several public representations to highlight key features of this VAT laws.
There are two immediate concerns about VAT legislation related to food items and medicines. Draft VAT laws (as available on FBR website) provide very limited and inadequate exceptions and there is a strong apprehension that most of food items and pharmaceutical products will attract a considerable price hike after implementation of VAT. Packaged food industry has already launched a media campaign warning about negative implications of VAT both on industry and consumers. The case of VAT on medicines is more complex and needs immediate attention. In both Federal and Provincial draft VAT legislation, you cannot find drugs/ pharmaceutical/life saving drugs in the category of exempted supplies or imports (The First Schedule and Section 11 of Draft Law).
However, the draft of Federal VAT Act provides a list of
zero-rated item in its second schedule which contains “such basic
pharmaceutical and medicine supplies as are specified by the Board.”
This is immensely problematic for two reasons. First, pharmaceutical are not exempted as such and only “basic pharmaceutical and medicine supplies” are zero-rated. The qualification of basic is alarming and may exclude bulk of drugs from this category. Second, Federal Board of Revenue has itself reserved the power of determining such “basic pharmaceutical and medicine supplies” and they lack any expertise in this regard.
The situation is apparently more complex in case of draft Provincial VAT Act which also contain an elaborated list of exempted and zero-rated items. You will not again find pharmaceuticals there! It is indeed alarming unless things have changed in some new drafts which are not posted on FBR website.
There are confusing signals about VAT on medicines. According news reports
FBR officials claim that there would be no VAT on medicines. Some reports
also indicate that only life saving drugs will be exempted from VAT.
Nevertheless, the existing situation is ambiguous and relevant provisions of VAT laws are absolutely inadequate. Let’s raise our voice and demand: No VAT on Food (packaged or un-packaged) and Medicines. The IMF’s deadline for implementation of VAT legislation is June 2010 and we should stand up to resist this regressive tax on our food and medicines. Poor people and
patients in Pakistan are already suffering a lot and we should do our bit
for their salvation.
What can we do?
We are asking Pakistanis
- to write letters to editors in leading national
newspapers.
-Contact your local Member of Parliament to communicate your concerns.
- Write to journalists and media anchors asking them to highlight these
concerns.
- Send emails and letters to FBR stating your concerns and demanding complete withdrawal of VAT on food and medicines.
- Write letters to Federal Minister of Health realizing him responsibilities of his office to protect interests of people of Pakistan.
- Send emails to IMF (Headquarters and Pakistan Resident Representative
Office) to share your concern about VAT on medicines and food items.
- Share this message further.
We are asking you to suggest what else we can do.
Hafiz Aziz ur Rehman
PhD. Candidate
ANU College of Law
The Australian National University,
Canberra ACT 0200
Phone: +61 (401) 371601
azeez.rehman@gmail.com