MANY believe that the rhetoric of Finance Minister Dr Abdul Hafeez Shaikh about the upcoming budget to be “business friendly” sounds hollow.

Even if it weren’t the election budget necessitating populist measures, the succeeding governments are not known to have ever admitted to announcement of a ‘non business-friendly’ budget.

The FM’s statement is pegged on ‘no new taxes and bringing more people in the tax net’. That is harping on the old tune. Most experts define ‘business-friendly’ as policies that build a robust and successful economy that works for all businesses, employees and consumers.

“It means ease of doing business and a regulatory environment that is conducive to business operation”, says one industrialist, adding that he subscribed to the view that it means cutting taxes.

Given the scarcity of resources, a huge gulf in the government’s receipts and payments, and widening fiscal deficit, one can only visualise a ‘status quo’ budget.

Sayem Ali, country economist for Pakistan at Standard Chartered Bank said: “a “business-friendly” budget may be one that the government would aim for. However, revenues will take a hit, since expenditures are also projected to increase. He said that the trend seen in the current fiscal year is likely to be extended to next. The government printed money in excess of Rs250 billion to finance the deficit and it could do the same next year. Yet, he said, printing money was no solution to cover economic ills; it essentially reflects the country’s risk to default. It would be difficult to tally numbers; already the budget deficit target at four per cent of GDP has been exceeded which, according to the SBP, has widened to seven per cent.

“In the last four years, every single target for the economy has been missed, may it be revenue collection, growth rate, budget deficit and so on”, argues Sayem Ali. He said that the need of the hour was to bring more sectors such as services, retail business, agriculture and real estate into the tax net.

And instead of pumping Rs400 billion in worthless public sector enterprises (PSE), such as Railways, PIA and Steel Mills, those PSEs ought to be put up for privatizsation. The economist recalled that the FM Abdul Hafeez Shaikh was the star performer in terms of largest number of privatisations in the Musharaff era. Yet he has had no penchant to follow the practice during his current tenure, as none of those promised Initial Public Offerings (IPOs) of Pakistan Petroleum, Oil & Gas Development Company, Pakistan State Oil, has materialised.

Zubair Motiwala, past President of Karachi Chamber of Commerce and Industry and currently chairman Sindh Board of Investment, thought that in order to be “business friendly,” the government has to take care of sectors such as textiles which as backbone of economy, provides employment to the largest number of people. He stressed that the payment of exporters’ stuck up money as promised in the textile package should be released. He said that the devaluation of currencies such as in Sri Lanka would hit exporters and the government should announce deemed duty drawback to mitigate the losses.

“A credible path to increase tax revenues and setting policy measures aimed at rejuvenating private sector investment may be key pillars,” contends Haji Ghani Haji Usman, a veteran stock broker. He stressed upon dividend payment by listed companies to the extent of 40 per cent of the profit, reduction of discount rate to a single digit and the restoration of law and order situation in industrial areas essential to promote investment and industralisation.

From the Karachi Stock Exchange’s vintage point, all eyes are likely to be on incorporation of the Capital Gains Tax (CGT) relief package as part of the Finance Bill. The KSE proposals are thought to have received a mixed response. The bourse has asked for five per cent cut in corporate tax rate for listed companies; extension of tax credit for newly listed companies from one to five years; mandatory requirement for corporates to pay 40 per cent profit in dividends to shareholders; elimination of tax on dividends received by companies to avoid multiple taxation and calculation of CGT for foreigners in foreign currency.

Some of the other measures for corporate sector on the cards may include, decrease in general sales tax on fertiliser, currently at 16 per cent; introduction of new tax on bank earnings on government papers, so as to discourage banks from putting all money in safe haven at the cost of credit-starved private sector; increase in import tariff from three to seven per cent on luxury goods and reduction in non-power subsidies. One economist said that it would be interesting to watch how the government plans to grapple with the $880 million ‘circular debt’ problem that has plagued a vast span of the economy and brought the entire energy sector on its knees.

There is lot of talk over the abolition of Federal Excise Duty (FED). Some reports suggest that FED on six kinds of oil would be withdrawn, reducing total number of excisable commodities from 21 to 16. For the corporate sector, the unanimous view is that the government would keep its promise of reducing the FED on cement to Rs300 per tonne from Rs500 per tonne and to phase it out in two years.

But there are concerns: “The Federal Board of Revenue (FBR) has so far collected Rs100 billion in FED during the current fiscal, against the initial budgetary target of Rs 165 billion, latter revised downwards to Rs139 billion”, pointed out an economist, adding “How will it be able to make up for the shortfall?”