KARACHI, May 1: Prof Dr Khawaja Amjad Saeed, Member National Council-ICMAP has suggested the government to prepare 2003-2004 budget for “five-years instead of one year” in order to attain rapid economic growth and consistency in fiscal policies.

Addressing a pre-budget seminar, organized by the Karachi Branch Council of Institute of Cost and Management Accountants of Pakistan (ICMAP) here on Wednesday, Prof Saeed said that the economic policies were not producing desired results and failed in controlling rising poverty and unemployment in the country. A long-term budget may address some of these pressing issues.

About one third population (45 million — 32 million in rural areas and 13 million in urban areas) was unable to generate sufficient income to provide minimum nutrition and other necessities of life, he said suggesting the government to specially focus its attention on providing relief to the common man in the upcoming budget. The government should take practical measures so that economic problems of the people could be resolved.

He said that policies should be aimed at generating employment opportunities for educated and skilled persons so that poverty could be eliminated from the country. “Provision of employment to unemployed is the obligation of the government,” he added.

He noted with pride that corruption at top level has disappeared. He offered his and ICMAP cooperation for removing irritants in the way of economic growth of the country.

He said Transparency International in its Corruption Perception Index in 2002 had placed Pakistan at 77th, whereas in 1999, the country was the third most corrupt nation in the world. “The credit for improving Pakistan’s image goes to President Musharraf’s government,” he added.

On the role of tax in the economy, Prof Saeed said in Pakistan there was no tax culture. “Sales tax is the tax of future but awareness about this is very limited,” he added.

He urged the government to reduce the number of taxes and tax rates so that a conducive tax culture could prevail and people could pay their taxes willingly.

He said people were hesitant in paying taxes due to cumbersome tax laws and it could be gauged from the fact that presently nearly 1.5 million persons were paying taxes, whereas the 7.2 million were eligible to pay taxes.

“This situation demands the government to rationalize its policies, simplify tax laws and broaden the tax base in order to bring more and more people under the tax net,” he said.

Badruddin Fakhri, Vice President of South Asian Federation of Accountants (SAFA), noted that the common man continues to suffer despite positive economic recovery after 9/11 incidents in shape of rising foreign exchange reserves, boom in stock market, fall in interest rates and 20 per cent rise in exports. The reason was that, Fakhri said, the government had not focussed on industrialization. As a result of this negligence, the country could not lure foreign investment in the industrial sector besides failing in opening more job avenues and poverty alleviation.

“Industrial sector is considered as engine of economic growth but the government has not offered any attractive incentives for setting up new industries in the country”, he said.

He suggested that infrastructure rates should be brought down and tax holiday be offered to the industrialists in the 2003-04 budget which could generate new vigour among business community to set up new units.

He was not satisfied with the performance of the Central Board of Revenue (CBR) and urged the government to eliminate the role of CBR in budget preparation. He pointed out that if the government wanted to get rid of poverty, unemployment and other economic problems etc., it should give top priority to education sector.

He asked the government to allocate a big chunk of the budget for the promotion of education to enhance literacy rate as it was the only remedy to overcome economic and social problems of the country.

He referred to Finance Minister Shaukat Aziz’s budget speech for 2002-03 in which he had highlighted the importance of education sector and its major role in economic progress of any country, but contrary to it — only Rs7.5 billion, one per cent of the total budget outlay, was allocated for this important sector.

He said that the government should now take practical steps for the promotion of this sector rather than mere lip-servicing. “It is time to prepare an “Education Vision” on the pattern of Textile Vision — which could give fruitful results,” he said calling for setting up vocational centres in collaboration with the private sector.

Fakhri said that the excess liquidity, available with banks these days, should be utilized in industrial financing rather than in various modes of consumer financing. He suggested productive use of this liquidity by extending cheaper loans to small and medium enterprises and other local industries in order to enhance country’s exports.

Mushtaq Ahmed Madraswala, Cost and Management Consultant, said that the 15 per cent sales tax rate should be evaluated whether this rate was viable for business and sustainable for the economy. “The 15 per cent sales tax should be brought down to 10 per cent,” he said adding the sales tax was the major contributor to the national kitty as the tax authorities in the fiscal year 2000-2001 collected a total of Rs347 billion and out of it Rs 120 billion were collected under the head of sales tax, in 2001- 2002 — out of the total revenue collection of Rs404 billion, the CBR netted in Rs170 billion under the sales tax.

He suggested, for bringing more people under tax net and said that the tax rates needed to be rationalized in the 2003-04 budget. “Higher tax rates always lead to tax evasion”, he added.

He also called for provision of a clear definition in the law which categorizes who is registered and unregistered person and which sector/industry/business needs to get itself registered.

Madraswala said black-listing of persons using fake invoices was a good step but the tax authorities should also introduce a system which helps registered persons to keep them away from entering any transactions with the black-listed persons.

He further said that the CBR should notify procedure for black-listing any person and it should also start issuing list of such persons.

He criticized the tax authorities for issuing illogical orders just to meet their revenue targets and suggested that this practice should be done away with.