Taxing renewable energies – Journal

The imposition of a sales tax of 17pc on solar energy equipment, as proposed in the complementary finance bill 2021, goes against the vision of the Prime Minister to increase the share of energies renewables in the overall energy mix to protect the environment and reduce dependence on expensive fossil imports. fuels. The increase in the price of solar energy, due to the withdrawal of the sales tax exemption, will likely affect the adoption of solar energy in the country, especially by middle-class homeowners, slowing the Pakistan’s progress towards clean energy as promised in the National Renewable Energy Policy of 2019. The policy aims to acquire a 30% share of renewables in the energy mix by 2030. Solar energy is the most large segment of the renewable energy industry in Pakistan and a significant increase has been observed in its adoption by the residential, industrial and other sectors. consumers because of tax incentives in recent years. The bill also proposes to tax wind energy which is the other major segment of the renewable energy industry.

The so-called mini-budget presented to parliament for the resumption of the IMF’s $ 6 billion stalled financing program taxes not only solar equipment, but also high-efficiency irrigation equipment, water treatment plants. effluents, etc. But for what exactly? Just for a few billion in income and at the expense of the environment? The new taxation illustrates how the government’s fiscal policies are completely separate from its environmental policy objectives. Many fear – and rightly so – that the rising price of solar energy will encourage the illicit trade in and / or import of cheaper, low-quality equipment to meet the demand of consumers in the classroom. medium. Indeed, collecting tax revenues is imperative for a sustainable economy and growth. But this need should not blind our political decision-makers. There are other avenues, both under-taxed and untaxed, from which the government can generate much more than what it seeks to harvest by taxing green equipment. The finance ministry should review its tax proposal and remove this regressive taxation from the bill.

Posted in Dawn, January 7, 2022

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