September 11, 2007	Tuesday	Sha'aban 28, 1428

ISLAMABAD, Sept 10: The government is likely to create “credit bureaus” to monitor and keep details of all outstanding legal disputes about bank loans.

Informed sources told Dawn on Monday that the official planners believed that credit bureaus only have information about those who have already acquired loans, but prospective and potential clients were needed to be created.

The State Bank of Pakistan has a bureau that has information on existing borrowers and the government was advised to create bureaus having information on potential clients as well, and the field of information should be more than just information on loans.

It will have information on any outstanding legal dispute and information on history of relationship with utility providers and any other information that might be pertinent in establishing credit worthiness of the business.

The government was also told that the creation of sector specific information providers and Small and Medium Enterprise Development Authority (Smeda) could play a significant role but the federal government needs to “redefine” Smeda’s role to take on this effort in a much more concentrated manner.

The government was advised to focus on rationalising income tax structure. The introduction of self-assessment scheme has helped in lowering compliance and corruption costs, the process needs to continue.

In addition, as the tax net broadens, the government needs to think about lowering tax rates. This will lower incentives for corruption as well as increase incentives of joining the formal sector.

Similarly, the official planners believe that the sales tax regime requires significant work which needs rationalisation, sales tax chain needs full documentation and compliance procedures need to be streamlined. The zero-rating of textile to get rid of major portion of the refund game was a positive step.

Customs clearance process has been improved a lot over the last few years. But the country needs further improvement to ensure a speedy clearance, less discretion for setting tariff rates to minimise chances of corruption and time delays.

More detailed studies of the taxation system are needed to pinpoint all threshold problems that distort incentives and could be affecting the growth of enterprises as well as entire sectors. This requires macro studies of tax systems across sectors, but is something that the CBR can accomplish on its own.

Removing these distortions need not have any tax revenue implications and should be win-win for both businesses as well and the government.

According to the planners, most businesses point out that electricity rate for commercial and industry activity are very high, the quality of supply and other services related to electricity position are poor, and there are high levels of corruption that they have to face in getting connections as well as paying bills.

In this behalf, the government was advised to have better planning about future needs of electricity. This should be tied to setting up new hydro-electricity projects, and getting access to more natural gas and having a better thermal, nuclear and hydro electricity mix.

Also, Wapda has to be forced to rationalise its tariff structures to reflect more clearly articulated economic objectives. Commercial and industry activity is subsidising domestic usage and is driving the cost of business much higher.

The National Electric Power Regulatory Authority (Nepra) has to be built up technically so that it has the power as well as the ability to carry out analyses regarding costs and tariffs that can provide alternative input into policy making for government and offer help to Wapda to work out better tariff structures.

In this behalf, it was said that benchmark or real competition has to be introduced between and with Discos, the local distribution companies, to improve the quality of services offered by them.