ISLAMABAD, June 14: The federal budget being unveiled on Saturday will indicate a Rs795 billion total capital outlay, remove 55 income tax exemptions and cut corporate tax by 5 per cent.

Informed sources told Dawn here on Friday that no “war tax”, which had earlier been calculated and decided at the highest level, will be imposed due to some reduction in tension with India. But defence budget will be increased which had otherwise remained static for the last three years. The government had provided an additional Rs15 billion for the defence forces during the current financial year.

There will also be no tax on pensions which was earlier contemplated by the officials concerned, the sources said. The federal planners have envisaged setting a 4.5 per cent GDP growth target in the new budget, as against 4 per cent fixed for the outgoing year. A 3.6 per cent GDP growth was actually recorded in the year.

There will roughly be a 30 per cent reduction in the cost of debt-servicing due to $12.5 billion rescheduling done by the Paris Club for 35 years.

The officials of the ministry of finance continued to maintain that a tax-free budget had been finalized and that the major emphasis will be on drastically improving the tax administration for increasing revenues and plugging leakages as agreed with the World Bank and the IMF.

However, the sources said that no major relief was expected in the new budget for the poorer sections as well as the salaried class.

“You remove the forces from borders and we will announce certain relief for the common man,” said an official of the ministry, when approached. He said the income tax ceiling of Rs60,000 will stay unchanged.

The government has already approved a Rs134 billion Public Sector Development Programme (PSDP) for the year 2002-2003.

All the provinces have also been allowed to levy a 2.5 per cent General Sales Tax (GST) to manage an additional Rs36 billion to be spent on social sectors.

There will be some adjustments in the duty structure, with finance minister set to announce that there will be only four major taxes which included sales tax, income tax, excise duty and custom duty.

The Central Board of Revenue (CBR) will be given the task of collecting Rs450 billion to Rs455 billion during the next financial year. The CBR authorities have failed to achieve the Rs453.8 billion original target for the year 2001-2002 which was revised down three times. Still, there is no indication that the final Rs414 billion target could be met by June 30. A number of “irritants” that were affecting the business and related to labour and social welfare departments will be removed in the new budget. In this behalf, the Cabinet Committee on De-regulation has finalized its recommendations and given to the finance ministry on the basis of which new measures will be announced.

The sources said the finance minister will also announce a 15 per cent increase in the human development and poverty reduction budgets. “The new budget pleads for higher growth and more focus on providing maximum support to the private sector and agriculture sector,” an official of the ministry of finance said.