Efforts on for equitable taxation in budget: Hafeez Sheikh

LAHORE: Federal Minister for Finance Dr Abdul Hafeez Sheikh has said the government is mulling to ensure equitable taxation in the upcoming budget for fiscal year 2011-12. Speaking at a pre-budget seminar organised by an English Daily ‘Pakistan Today’ at Royal Palm Country Club here Sunday, he said that every effort would be made to bring those evading taxes in the taxation mechanism.Abdul Hafeez Sheikh said, though changing the current governance pattern in Pakistan is an uphill task, a gradual progress in this regard is going on. He said the state apparatus dominates the society in Pakistan and cumbersome rules give the bureaucracy an upper hand, which needed an active participation of civil society to end this trend.The Finance Minister termed the agriculture tax as a provincial subject, however, added that federal government can collect this tax on behalf of the provinces, if they desire and authorize it to collect and deposit it in their account.Another alternative, he said, is to amend the constitution to authorise the federal government to collect income tax on agricultural income.“Budget is not made in vacuum,” he said, adding that planners have to strike a balance and look in the eyes of powerful to deny their demands. Moreover, the tax culture has not yet developed in Pakistan, he maintained.Hafeez Shiekh said that political instability accompanied with unstable economic policies have denied the country an opportunity for sustained growth.Now, budget making has become more difficult for the federal government after parting with Rs 300 billion that has been given additionally to the provinces, he said.He said the present government did bring down the budget deficit from 7.4 percent of the GDP it inherited from previous regime and was hoping to bring it down to 4.5 percent this year, but the impact of historic floods was beyond the control of the government. However, he added, the coalition government did take some bold steps like doing away with exemptions on fertilizer, textiles and leather.Dr Sheikh assured the businessmen that rates of existing taxes would not be enhanced, however, decrease in GST rates would not be possible due to huge gap between expenditure and resources.

He said that ever since he took over, efforts have been made to strengthen the institutions, citing that Planning Commission would chalk out a growth strategy that would be followed by the government.The Federal Board of Revenue (FBR), he added, has been given full autonomy to nab tax evaders irrespective of their status. He said FBR Chairman transferred 100 influential officials recently and no pressure was exerted on him to cancel even one transfer.He said FBR Chairman identified 4,000 companies ‘many highly reputed involved in obtaining fake refund amounting to Rs 7.5 billion. The FIRs against all of them have been registered irrespective of their political influence, he said, asserting that Rs 1.25 billion have been recovered and the remaining parties have promised to pay back, requesting the FBR not to prosecute them.He said transparency has been restored in taxation system. Against refunds of Rs7.5 billion paid last year the FBR chairman has issued refunds of Rs 45 billion from his office in transparent manner, he added.The SBP Governor Shahid Hafeez Kardar said that inflation is a major concern for the central bank, citing that a recent survey of 1086 enterprises revealed that majority are increasing prices after every 3-4 months due to inflation. He said the gap between resources and expenses is widening.

He said terms of trade have changed as many sectors of economy having tax potential are under the domain of the provinces. However, he said, the federal government has to bear the brunt of expenses that have increased like in defense spending, debt servicing and subsidies of power and food.Kardar said government has crowded out credit for private sector, as its credit uptake increased by 2.1 percent in 2009, 3.1 percent in 2010 and 3.5 percent in 2011. The government borrowing, he added, increased during this period by 60 percent in 2009, 22 percent in 2010 and 30.5 percent in 2011.He said the currency in circulation is now Rs 1.53 trillion or 32 percent of the deposits. He said currency in circulation increased by 38 percent in last three months. He said 2.9 trillion loans have been rolled over on short term basis this year which not a good sign.Kardar said the way forward is to contain the expenditure, review the subsidies and introduce new tax measures.Planning Commission Deputy Chairman Dr Nadeemul Haq and former federal finance ministers- Sartaj Aziz, Dr Salman Shah and Shaukat Tareen also addressed the seminar. – APP