Pakistan's new milk tax makes dairy more expensive in Karachi than in France, Australia

Karachi: Milk prices in Pakistan surged by more than a fifth after a new tax was applied, making the dairy staple more expensive than in France, Australia and some other developed nations.

Ultra-high temperature, or UHT, milk now costs Rs370 ($1.33) a litre in supermarkets in Karachi.

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That compares with $1.29 in Amsterdam, $1.23 in Paris, and $1.08 in Melbourne, according to data collected by Bloomberg.

An 18 per cent tax was applied to packaged milk as part of taxation changes approved in the national budget last week. Previously, it was tax-exempt.

Before the impost, which resulted in retail prices increasing by as much as 25 per cent, milk costs were comparable with developing countries such as Vietnam and Nigeria, said Muhammad Nasir, a spokesman for the local unit of Dutch dairy producer Royal FrieslandCampina NV.

Costlier milk will add to rising inflation in the South Asian country, where wages have stagnated, eroding spending power.

The increase may also worsen child health. About 40per cent of the nation lives in poverty.

“It will deny nutrition from a population that is already suffering from malnutrition,” Nasir said in a text message. About 60 per cent of Pakistani children under 5 years suffer anemia and 40 per cent suffer from stunting.

Pakistan raised taxes by 40p er cent, the highest on record, in last week’s budget aimed at meeting conditions set by the International Monetary Fund for a new bailout.