Budget proposals
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.