Losses of SOEs exceed defence budget outlay, Senate told

Updated 06 Jun 2020

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Minister says government will use travellers’ data to hunt tax evaders. — APP/File
Minister says government will use travellers’ data to hunt tax evaders. — APP/File

ISLAMABAD: As the controversy over the plan for massive retrenchment in the Pakistan Steel Mills (PSM) echoed in the Senate on Friday, a minister while justifying the decision informed the house that the accumulated losses of the state-owned enterprises (SOEs) had exceeded the annual defence budget outlay.

“The previous visionless, regressive and backward governments that made huge inductions in these [SOEs] are responsible for it,” Minister for Industries Hammad Azhar said during the question hour.

He said the PSM started production in 1985 and ran into losses in 2008-2009. It was shut down in 2015 and the government over the five-and-a-half years of zero production has paid Rs35 billion in salaries, besides accumulating Rs30bn retirement dues.

Since 2008, he said, the federal government had given bailout packages to the PSM amounting to Rs90bn. He said the monthly salary bill of the PSM came to Rs350 million.

Mr Azhar said when the Pakistan Tehreek-i-Insaf (PTI) came to power, the PSM had debt liabilities of Rs211bn in addition to accumulated losses of Rs176bn.

Minister says government will use travellers’ data to hunt tax evaders

The minister said currently the PSM had liabilities of Rs230bn.

He said the previous governments of the Pakistan Muslim League-Nawaz and the Pakistan Peoples Party could neither revive nor privatise the mills.

He said the PSM was spread over an area of 19,000 acres and the core operations the government wanted to lease out for privatisation purposes covered 1,800 acres out of it.

“We do not want to be owner and operator but wish to be owner and policymaker. We want partnership with private investor for operations,” the minister said.

In the first phase, he said, the government wanted to give a severance package to about 8,500 employees. Each of these employees will on an average get Rs2.3m, some even Rs6m to Rs7m, depending on the pay scale and service length.

He said the government would go for debt restructuring before privatisation of the PSM.

PML-N senator retired Lt Gen Abdul Qayyum, who had served as chairman of the PSM from Jan 2004 to Sept 2006, told the house that the mills had liabilities of Rs7.8bn when he assumed the charge. In about three years the PSM earned a gross profit of Rs18bn and paid Rs6bn in taxes. He said the PSM had a bank balance of Rs10bn and a stock of finished products and raw material worth Rs12bn when he left it on Sept 13, 2006.

PML-N parliamentary leader in the Senate Mushahidullah Khan recalled that Prime Minister Imran Khan used to claim that the PTI after coming to power would successfully run PSM operations.

Leader of the opposition in the house Raja Zafarul Haq warned that massive retrenchment would have broad repercussions and asked the Senate chairman to refer the matter to the standing committee concerned, which the chair did.

Answering another question, Mr Azhar confirmed that the government planned to use frequent travellers’ data and commercial and industrial gas connection details to bring more and more people into tax net.

He said all countries which effectively collected taxes used non-human interface and database for the purpose.

He said it was for the first time that an exercise was under way to integrate the plethora of data available with the government but existing only in files in an organised manner.

“If only a fraction of those having commercial and industrial connections pays taxes, it is logical and legal to use it. This should have happened earlier,” he said.

He said it was not harassment in any way. “If the lifestyle, expenses and business operations of some individuals show something else and they are not even filing tax returns, it is right of the government to tax them. Otherwise, common man would have to bear the brunt.”

The minister said it was for the first time that the tax returns had gone up by a million from 1.6 million to 2.6 million in a single year. He said the database had a key role to play in it.

“We have not aptly leveraged it and are in the process of setting up a platform for it.”

The minister said the pre-coronavirus tax collection saw a growth of 27 per cent, which was highest in last five to six years.

He said previously tax was collected through levy on imports, raw material and inputs.

He declared that the government would phase out withholding tax on bank transactions and heavy taxation on imports.

“If you want to integrate with the global economy and want to become part of global value chain, import based taxes are an unhealthy thing,” he opined.

He said import based taxes in the region were around 26pc, but in Pakistan these stood at 40pc.

“All these deteriorations were brought in between 2013 and 2018 when disproportionate taxes were imposed on imports.”

He said the post-pandemic tax collection had declined by 30pc as commercial and industrial activities remained under suspension.

The house will meet again on Monday at 4pm.

Published in Dawn, June 6th, 2020