Rs1tr Punjab budget aims at 5.5pc growth

Published June 14, 2014
Chief Minister Shahbaz Sharif offers a glass of water to Finance Minister Mujtaba Shujaur Rehman after the budget speech he delivered during continuous shouting and loud protests by the opposition.
Chief Minister Shahbaz Sharif offers a glass of water to Finance Minister Mujtaba Shujaur Rehman after the budget speech he delivered during continuous shouting and loud protests by the opposition.

LAHORE: Punjab’s Rs1.033 trillion revenue budget for the next financial year proposes a major fiscal stimulus for the provincial economy to grow by 5.5 per cent and seeks to increase the province’s own tax collection by extending the scope of and raising the rates of several existing levies that mostly target the affluent.

The budget presented by Finance Minister Mujtaba Shujaur Rehman on Friday is 18.5pc heftier than the one for the current fiscal because it estimates 14.5pc increase in transfers from federal taxes to Rs804 billion, 30pc surge in provincial taxes to Rs164.7bn and 49pc rise in provincial non-tax revenues.

Apart from the revenue income, the province is expecting foreign project assistance to spike 27pc to Rs37.7bn and foreign debt by 26pc to Rs21.84bn.

The government hopes to save a revenue surplus of over Rs333bn to finance provincial development in spite of about 16pc increase in its current expenditure.

The Shahbaz Sharif government plans to invest Rs345bn in large infrastructure and social development projects next year – the first year of its four-year medium-term development framework (MTDF) – to stimulate growth from the present 4.8pc to 8pc by 2017-18, create 4m new jobs and pull 7m people from below the poverty line.

The development spending will aim at creating opportunities for the private sector to put in its bit to help the government achieve its medium-term objectives. It will be financed primarily through revenue surplus and foreign project assistance. The estimates for development expenditure are 19pc larger than original allocation and 54pc higher than revised allocation.

On taxation side, the Punjab Finance Bill 2014-15 suggests taxes on large luxury houses, doubling of annual motor vehicle tax for and above 1300cc cars and other vehicles and implementation of a levy in the range of Rs20,000 and Rs35,000 on imported cars and jeeps of different engine strength of above 1590cc.

It also raises the existing stamp duty rate on transfer of immovable property by 1pc to 3pc and extends the scope of provincial sales tax on service by including 10 new services.

The bill provides several incentives on the establishment of hostels in cities for working and other women and reduces registration fee from existing 1pc to Rs500 and Rs1000 depending upon the value of the property.

No step was taken to expand the tax on income from agriculture, which is estimated by economists to have a potential of generating nearly Rs50bn for provincial development against its present yield of around Rs800 million. This is in spite of federal Finance Minister Ishaq Dar’s laments that the provinces are not prepared to collect the tax nor hand over it to the central government.

The budget allocates 36pc of fiscal stimulus – Rs136bn – for development in south Punjab and an amount of Rs31bn for solar, hydel and coal power projects. It plans to develop ore iron and coal deposits estimated to be worth $70bn in the province, increase spending on policing and security, improve public service delivery in education, healthcare, water supply and sewage sectors, launch a health insurance scheme for the deserving people and raise its development and non-development investment in agriculture, irrigation, industrial infrastructure and roads.

At the same time, the government has announced more funds for its pet signature projects like yellow cab scheme, free laptops for students and metro bus projects in Rawalpindi and Multan and metro train for Lahore.

The new budget appears to be a deviation from the previous budgets given by the Shahbaz Sharif government in Punjab since 2008, but many analysts remain sceptical about its success.

“This year’s budget has missed most revenue collection and development targets,” noted financial analyst Dr Shahid Zia.

“It is because the province hasn’t been able to reform its tax collection machinery to raise its own tax revenues and effectively bring the untaxed and under-taxed areas of the provincial economy into the net.

“The new levies on the rich are laudable, but these aren’t going to help the government significantly increase its revenues. Unless the provincial tax regime and administration is reformed, the government will continue missing its budget targets at the cost of development and jobs,” he argued.

Published in Dawn, June 14th, 2014

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