KARACHI, April 28: The budget for 2003-04 will provide tax incentives linked to “focused outcomes” in areas targeted for growth and employment.

Dwelling upon the next year’s taxation policy, Finance Minister Shaukat Aziz told Dawn here on Saturday that the number of tax slabs would not be changed and there would be a few concessions. The tariff would remain at a maximum of 25 per cent. No fresh tax will be levied.

Official sources added that the tax incentives would be for industry and products with growth potentials which can start yielding immediate results. Whereas the fiscal stimulus will be related to focused outcomes, the government is committed to the IMF to withdrawing a sizable number of income-tax exemptions including the remaining withholding tax on incomes for National Saving Scheme (NSS) instruments. The Fund has identified 55 tax exemptions.

Officials see focused outcome in the housing sector for which tax relief is stipulated. It is an area where 75 per cent of spending goes for purchases of building materials produced by ancillary industries, says a builder. To make loans affordable for the middle classes, the tax deductible limit on interest payment on mortgage upto Rs100,000 may be raised.

CBR Chairman Riaz Ahmad Malik has hinted that excise duty on cement and housing ancillary industries may get incentives to manufacture cheaper products.

The finance minister told a national industry conference in Karachi last week that the government would reduce the cost of doing business and provide an hassle-free environment. The next budget would be investment friendly.

With the economy poised for growth and investment climate improved as a result of low interest rate and stable rupee, the industry has mounted demand for duty-free import of machinery and plants, cheaper energy, lower tax rates and adequate social and physical infrastructure.

And the government appears to be responding to the demand of industry, says an industrialist. Prime minister Zafarullah Jamali has appointed a committee to look into the possibility of reducing electricity tariff for industry and suspended the move to increase power charges by WAPDA and KESC approved by NEPRA.

To make economic growth socially sustainable, the government plans to increase spending on social sector by Rs20 billion next year over the current year’s budget estimates. And development spending has been gradually increased to Rs134 billion to provide the much needed physical infrastructure. A substantial increase in development spending, an allocation of Rs 150 billion, is planned for the next year.

A major handicap in increased capital and social spending is billion of rupees of official subsidy to WAPDA and KESC. Once the two utilities are made financially viable or privatized, these funds could be diverted towards poverty reduction programmes, says the finance minister.