ISLAMABAD, May 15: The federal government has decided to simplify tax laws, widen tax exemptions for low-income groups, increase tax-to-GDP ratio and raise the development budget in 2006-07, Prime Minister’s Adviser on Finance Dr Salman Shah told Dawn on Monday.
“Besides focusing on these four major areas, substantial funds will also be offered to provinces under the new resource distribution formula of the National Finance Commission (NFC),” he added.
Dr Shah said the annual grant to provinces which stood at Rs8 billion in the past would be increased to Rs27 billion in the next budget in addition to their increased share under the NFC award.
The adviser said that a decision has also been to make available significant funds for infrastructure development during the next financial year. Major funding, he said, would go to the development and infrastructure budget as had been directed by President Gen Pervez Musharraf and Prime Minister Shaukat Aziz.
Replying to a question, he said that International Financial Institutions (IFIs) would extend partial financial assistance to the government to fund the new budget. “Such assistance from the IFIs, is a usual practice but the major funding will be made available by the government for the new budget,” he said.
He said the government could not ignore extending relief to tax payers in the new budget particularly those who were in the low-income group.
However, the finance adviser said the government could not provide maximum relief to people without further achieving increase in the tax-to-GDP ratio. He said that the Central Board of Revenue (CBR) would be geared to collect additional taxes like the previous years to help the government implement its development strategy.
Mr Shah said though the government wanted to offer increased funds for development purposes, it was cognizant of the fact that the budget deficit, which was 3.5 per cent of the GDP for the current financial year, should remain under control.
The budget deficit target for the next financial year, he said, would be announced in the budget for 2006-07 for which all necessary preparations were going on for the last few weeks.
The finance adviser said that budget planners have been directed to allocate sizable funds for health and education in the next budget.
The financial management, Dr Shah said, was another important area which would be focused in the next budget.
The Centre and provinces, he said, would have to strive hard for ensuring prudent spending so that objectives of development could be realized to some major extent.
