Bud­get pro­pos­als

The Pak Banker - - FRONT PAGE -

The Fed­er­a­tion of Pak­istan Cham­bers of Com­merce and In­dus­try has pro­posed to the govern­ment to re­duce tax rates in order to help en­hance com­pet­i­tive edge of the coun­try's prod­ucts in both do­mes­tic and global mar­kets. In a state­ment, the FPCCI has said that this will help broaden the tax base and cur­tail the par­al­lel econ­omy. High tax rates pro­vide in­cen­tives for tax eva­sion and cor­rup­tion and also re­sult in a high cost of do­ing busi­ness. The FPCCI has pointed out that out of more than 4 mil­lion Na­tional Tax Num­ber (NTN) hold­ers, the tax fil­ers were 2.1 mil­lion in 2006-07, which dipped to 1.57 mil­lion in 2011 and fur­ther fell to 1.39 mil­lion in 2017. This shows that the FBR has lost one mil­lion re­turn fil­ers over the last 10 years de­spite an­nounc­ing higher with­hold­ing tax rates for non-fil­ers who are happy to pay more in ad­vance tax in­stead of fil­ing re­turns.

The FPCCI has un­der­scored the need for tak­ing mea­sures to fa­cil­i­tate the ex­ist­ing tax­pay­ers who are con­tribut­ing to the na­tional tax pool and en­cour­ag­ing po­ten­tial tax­pay­ers to come in the tax net vol­un­tar­ily through per­sua­sion in­stead of pros­e­cu­tion. It has voiced con­cern over ex­ces­sively bur­den­ing the man­u­fac­tur­ing sector that con­tributed 20.9% to the na­tional econ­omy and had a share of 70.4% in tax pay­ments com­pared to the agri­cul­ture sector whose share in gross do­mes­tic prod­uct (GDP) and tax pay­ments was 19.5% and 1.2% re­spec­tively in 2016-17.

There is no doubt that the govern­ment needs to for­mu­late a com­pre­hen­sive ac­tion plan for broad­en­ing the tax base and im­prov­ing the tax-to-GDP ra­tio. In this con­text it is wel­come news that the govern­ment has de­cided to an­nounce a tax-free bud­get and cut in­come tax and reg­u­la­tory duty rates in a bid to pro­vide max­i­mum re­lief for all seg­ments of the so­ci­ety. This has been stated by

Dr Mif­tah Is­mail, Ad­viser to the prime min­is­ter, who has dis­closed that the govern­ment would also aim to strike a bal­ance be­tween the con­sol­i­dated and ex­pan­sion­ary fis­cal pol­icy by try­ing to re­strict the bud­get deficit to around 4.5% of to­tal na­tional out­put in fis­cal year 2018-19 (FY19). It has also been de­cided to re­duce the num­ber of with­hold­ing taxes in the new bud­get that had not con­tributed to rev­enue growth. Tax rates for the salar­ied class would also be con­sid­er­ably re­duced.

Ac­cord­ing to the Fi­nan­cial Ad­viser, the bud­get 2018-19 would be lib­eral, tax-free and fo­cus on a few ar­eas where the govern­ment could en­sure im­prove­ment. He fur­ther said the govern­ment would not an­nounce new de­vel­op­ment pro­grammes and the PSDP 2018-19 would fo­cus only on na­tional pri­or­ity projects like high­ways and wa­ter reser­voirs. No new taxes will be im­posed in the bud­get. In­stead, the govern­ment will re­duce the num­ber of with­hold­ing taxes that are con­tribut­ing very lit­tle to the kitty, but are cre­at­ing huge prob­lems for the peo­ple. Be­sides ra­tio­nal­is­ing tax rates, the cur­rent in­come tax ex­emp­tion thresh­old of Rs400,000 per an­num is likely to be sig­nif­i­cantly in­creased, low­er­ing the tax bur­den on the salar­ied class.

The na­tional econ­omy is in dire straits and there is need to de­vise ap­pro­pri­ate bud­getary mea­sures to in­cen­tivize in­vest­ment and ex­ports. Ex­ports are the main­stay of our econ­omy and no ef­forts should be spared to fa­cil­i­tate in­dus­trial and agri­cul­tural pro­duc­tion. An­other ur­gent need is to in­crease job op­por­tu­ni­ties for large num­bers of youth coming out of our uni­ver­si­ties. Self em­ploy­ment is a great way to utilize the po­ten­tial of our young work force and it must be tapped by all means pos­si­ble.

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