• Promises no power tariff hike, no additional tax on already taxed under coming budget
• Forecasts 20pc rise in government revenues

ISLAMABAD: Finance Minister Shaukat Tarin on Sunday said the coming budget, expected to be unveiled on June 11, would ensure putting tax evaders behind bars after nabbing them through third party audits, technology and other innovative means.

He promised that there would be no more electricity tariff increase and additional tax burden on the people already taxed.

At a virtual news conference, the minister said that government revenues would be enhanced by over 20 per cent or about Rs1 trillion this year to reach closer to the targets given by the International Monetary Fund (IMF). Government expenditures would be controlled through targeted subsidies and circular debt payments would be stretched out to secure some breathing gap for 3-4 years along with plans for an increase in economic growth rate to 7-8pc to absorb additional capacity.

“In this budget, we will show leniency and avoid harassment. We will encourage self-assessment but at the same time ensure third party audits” and those found evading taxes would be put in jails as such people were punished in many other countries, he said. “There would not be only penalties for tax evasion,” he said, adding that the real estate sector would have to get out of the informal economy and work under a proper framework.

The finance minister confirmed that the IMF wanted next year’s tax target at Rs5.96tr by adding some taxes here and there, withdrawing some tax exemptions and generating additional taxes through salaries and so on but “we have said we will get close to this number through innovative means and without further taxing the already taxed”.

This means that the IMF wants additional revenue of about Rs1.3tn next year, from Rs4.7tr expected this year. With about 5pc GDP growth and 7pc inflation, the revenue is expected to automatically go up by 12pc, leaving a gap for about 8pc higher revenue through additional measures.

“Revenue, revenue and revenue is the next year’s priority” to be achieved through innovation as the authorities would make good use of technology and bring those people into the tax net who were not paying taxes and incentivise traders to pay sales tax as had been done in Turkey and Columbia, Mr Tarin said.

“We have to achieve 20pc growth in revenue collection,” he said, adding that otherwise the government would remain highly indebted and there would be no space for private sector growth.

He said the revision of the Budget Strategy Paper had been completed and the government would not increase power tariff at this stage, it would not further burden the people and instead bring an alternative plan. In this regard, the subsidies would be targeted and reduced, he said, adding that out of 35 million electricity consumers, 29m had subsidised bills which meant the subsidy was not reaching those who deserved it.

He said Special Assistant to the Prime Minister on Social Safety Dr Sania Nishtar was coming up with a new programme for next year that would provide subsidy on electricity, flour and other essential commodities to the poor people in a targeted way.

He said the capacity payments were set to increase from Rs465 billion three years ago to Rs1.455tr by 2023, which needed to be initially stopped and then reversed through innovative and alternative means instead of putting more burden on honest consumers. However, the finance minister warned that any dramatic reduction in circular debt should not be expected next year.

He said budget preparations were in full swing through which the government would come up with comprehensive, well thought out and out-of-box solutions that would set the stage for inclusive and sustainable growth for all, including the poor, the rich and the middle class.

Asked whether SAPM on finance and revenue Dr Waqar Masood Khan had called a Pakistan Bureau of Statistic (PBS) team with a directive to project 4pc GDP growth rate, Mr Tarin said this was wrong as neither Dr Waqar could call a PBS meeting nor say such a thing. The PBS was not under the ministry of finance, he said, recalling that as finance minister 11 years ago he had secured technical assistance to make the PBS an independent body instead of operating under the finance ministry and it was now under planning division.

He agreed that though Planning Minister Asad Umar had tweeted about the growth numbers, he should come forward with an explanatory news event and perhaps open up entire data and proceedings of the meeting of the National Accounts Committee that finalised the economic performance numbers as the government had nothing to hide and no incentive to manipulate data.

Responding to a question, the minister said that under the seventh National Finance Commission award he had been able to deliver with consensus a decade ago and promised increasing the tax-to-GDP ratio from 8.8pc at that time to 20pc at the rate of 1pc a year. “Had that been done, our revenue would have been Rs10tr at present and there would have been no problem but neither the provinces nor the federation met those targets. We have to take tax-to-GDP ratio to 20pc in 6-7 years now,” he said, warning that unless that was done, neither the provinces nor the federation could be comfortable.

The finance minister hoped that Pakistan would be able to exit the grey list of the Financial Action Task Force in June as all policy issues had been cleared and only a couple of transactional matters were being addressed, which he would not like to disclose at this stage. He said India was trying to keep Pakistan under pressure by utilising its friendly relations with some countries but Pakistan also had friends in the world capitals.

Mr Tarin said short, medium and long-term planning for 12 critical sectors had been made to boost economic growth that would be presented for approval to the prime minister within the current month. The first priority was price stability, he said, adding that while medium and long-term measures would take time, short-term price stability would be achieved through administrative measures against traders involved in hoarding and profiteering and improved supplies by creating strategic reserves and flooding the market with commodities wherever traders tried to make undue profits.

In the longer term, the government would create structures such as commodity warehouses and cold storages where farmers came and sold their produce directly which would ensure price stability and encourage more production.

He said the second priority was to ensure economy grew that would also increase revenues and income of the people. He said Pakistan had been following the trickle-down approach to economic growth but now the bottom-up approach would be utilised as well so that four to six million households at the bottom were also able to have a roof, livelihood, education for their children and health facilities.

Third focus would be on productive sectors of economy through special initiatives for housing, agriculture, industry and exports. He said Pakistan was no more a food surplus country, in fact it had turned into food deficient nation because of lack of focus over the years.

Published in Dawn, May 24th, 2021

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