ISLAMABAD: After doling out over Rs480 billion to settle the circular debt in his first budget two years ago, Finance Minister Ishaq Dar said on Saturday that circular debt had nothing to do with the budget and hinted at withdrawing tax exemptions for influential people drawing salaries from the national kitty.

In his post-budget news briefing where he repeatedly lost temper over difficult questions, the minister said the government would not let anybody raise prices on account of budgetary measures and would use administrative means to deal with price manipulators through provincial governments.

Mr Dar had claimed credit for settling a huge circular debt in the 2013 budget to reduce fiscal deficit from 8.8 per cent to around 6.3pc.

The minister was asked why the budget documents were silent about circular debt this time or, with a bad choice of words, if he had “done some accounting tricks”.

“This betrays an absolute lack of knowledge. Circular debt has nothing to do with budget…For your information, circular debt doesn’t total Rs400bn as you claim, but Rs270bn, as reported by the ministry of water and power,” he said angrily, adding that the finance ministry had nothing to do with it as the payables and receivables belonged to entities under the ministry of water and power. “We only provide subsidy for the tariff differential, which is duly accounted for in the budget,” he said.

The power sector subsidy for the next financial year has been brought down by 47pc to Rs118bn from Rs221bn.

TAX EXEMPTIONS: In reply to a question about withdrawal of tax exemptions to cabinet members, parliamentarians, generals and judges under schedule-II of the income tax ordinance, the minister said: “We will consider this next year. You create the atmosphere and I’ll do the needful.”

But he warned that if the government withdrew their tax exemptions, they would demand compensation through salaries.

Mr Dar rejected the opposition’s criticism that the federal budget was pro-rich and anti-poor. “It is not a pro-rich budget. It is a pro-poor budget,” said the minister and went on to explain why he was saying so.

He said no new taxes were imposed or rates increased on essential commodities except for packed yogurt, cheese and some other dairy products consumed by a very few rich people, so “nobody will be allowed to increase prices on the call of budget. We will take quick administrative action and immediately write to the provincial governments in this regard”.

He said the super-tax imposed on individuals, associations of persons (AoPs) and companies with an income exceeding Rs500 million would generate up to Rs22bn and it would be used in the resettlement of temporary displaced persons. The total amount needed for the task is estimated at Rs80bn.

He said there were around 200 individuals, eight AoPs apart from companies in this category.

“Do they think these are poor people?” he asked and referred to the shadow budget presented by Pakistan Tehreek-i-Insaf leader Jahangir Tarin as removed from reality.

He also talked about an increase in capital gains tax, tax on dividends and non-payment of dividends, mercantile exchange and various increased tax rates for non-filers in an attempt to prove that the entire tax burden would be borne by the rich or those who evade taxes.

He said it was easy to borrow and spend aggressively to appease some people, but the PML-N government had pursued a policy of fiscal responsibility and fiscal consolidation. “We are now moving into the parallel objective of growth and job creation.”

PACKAGE FOR KP: He said the special package for Khyber Pakhtunkhwa was beyond political consideration and on the basis of honest evaluation of requests coming from the business community, parliamentarians and PTI leaders.

In reply to a question, he said facilities were granted to sectors which had the potential for quick growth, e.g. agriculture, construction and industry. The new measures would generate up to 2.5m fresh jobs, the finance minister claimed.

He noted a series of factors like increased BISP and Baitul Mal, tax relief for lower middle class by increasing taxable income from 400,000 to Rs500,000, subsidised loans for solar agricultural tubewells and prime minister’s initiatives for the youth and widows to argue that he had presented a pro-poor budget.

The minister said the combined impact of increase in pensions and salaries ranged between 11-14pc and averaged 12.5pc because two ad hoc increases had been merged with basic salaries and would cost an additional Rs47bn. He said one of the four ad hoc reliefs announced by the PPP government increasing salaries by 50pc in one go would never be possible to become part of salary.

In reply to a question, Mr Dar said the federal government had promised to finance one out of three lanes of Karachi’s mass transit project, while another would be funded by the Sindh government and the third one by the private sector. He said the federal government had released a part of its funding and it would now be the responsibility of the provincial government to take care of those obstructing the project.

He said the increased federal excise duty on cigarettes had been implemented with immediate effect because the market had already been charging higher rates to consumers. He said the tax rate on small mobile phones was not increased but in fact reduced by Rs50 per set.

He explained that two different taxes were in vogue on mobile sets that were put together as advised by courts. He said the total tax on cheaper phones was reduced from Rs350 to Rs300 while medium level sets would remain unaffected at Rs500 tax. The high-end sets costing Rs70,000 would now be charged at Rs1,000 tax per set instead of existing Rs700, he added.

The minister took exception to media reports that Rs6bn wheat subsidy for Gilgit-Baltistan had been abolished, saying it was politically motivated ahead of local bodies elections and claimed to have protected it in the budget. Budget in brief distributed by the government machinery, however, showed no such allocation for Gilgit-Baltistan.

Published in Dawn, June 7th, 2015

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