KARACHI, March 30: The next fiscal year’s budget will carry no new taxes, with no increase in rates and will have lesser number of taxes. The number of excise bearing items will be further reduced and the maximum import duty rate will be brought down to 25 per cent from 30 per cent at present.
“A Task Force in the Central Board of Revenue is working overtime to have a fresh look at the tariff structure of raw material items to ensure competitiveness of the domestic industry,” Finance Minister Shaukat Aziz informed a gathering of business professionals, tax practitioners and company executives on Saturday.
“Wealth tax is not coming back,” he declared in a firm tone. “We will not burden people with new taxes,” the minister announced the policy outlines of the next budget in his key note presentation at a “Pre-budget seminar” organized by the Management Association of Pakistan (MAP). He declared that the government is very sensitive to the sufferings of the common man and is pursuing a poverty alleviation programme. The two other speakers were tax practitioners Ibrahim Sidat and Khalid Rafi, who in their brief presentations touched the issues of micro irritants in tax administrations.
The minister chooses the occasion to announce the decision of President Pervez Musharraf to remove 15 per cent GST on life-saving drugs. He said a committee of three ministers, including himself and the health and commerce has been formed to look at the pricing structure of drugs in Pakistan.
“Why are the doctors prescribing costlier foreign medicines when local made drugs of same potency is available at very cheap price,” he said. Shaukat said that 60 per cent drugs in Pakistan are cheaper than in India.
He made it clear that improvement in revenue collection and an effective expenditure management will remain the guiding principles for the government in the next budget too.
He announced the government’s policy of moving away from dependence on withholding tax regime and a gradual shifting from presumptive taxation coupled with elimination of tax exemptions in the income tax.
The minister disclosed that the government has appointed five members on the Central Board of Revenue. All these five members are from the private sector, who include a fiscal economist, a chartered accountant and a lawyer.
Appointments of these five members, including one for the Human Resource Development, he said, marked the beginning of restructuring of the Central Board of Revenue. The government is now moving towards an income tax system based on 100 per cent self-assessment with a transparent provision of 20 per cent audit.
He said that the CBR was recruiting young professionals as tax collectors and the government was ready to offer them adequate compensation and pay package.
Tax practitioners’ criticism on the tax administration did not amuse the minister much, who remarked that “CBR bashing is a very popular pastime” and called upon the taxpayers to realize their responsibilities as well.
An all round improvement in governance is also on the agenda and the minister said a deregulation committee had suggested a number of measures at the federal and provincial levels. Some of these measures will be announced in the next budget.
Budget is not merely a document of taxation, he emphasized and pointed out that it offers government’s strategy of re-directing resource flow.
The minister said that the present government in the last two years had pulled Pakistan out of debt trap on a long-term basis and built up a foreign exchange reserve of over $5 billion and stabilized dollar-rupee parity.
Since September last year, he said, the State Bank purchased directly $2 billion from the market. It helped in building up reserves, stabilizing rupee-dollar parity and improving the liquidity of the banks.
In last two years, he said, Pakistan had repaid $4.5 billion loans that included $1.4 billion to adjust short-term commercial loans. Pakistan’s commercial loan borrowing, he said, now amounted to $600 million a year against $2 billion.
Total inflow of fresh loans, he said, was $3 billion in the last two years. This is the reason that Pakistan’s foreign debt liability remained unchanged at $38 billion in the last two years despite fresh inflow.
In another context, he said that the government had same set of laws for the foreign and domestic investors. He said the government’s job was to provide an even playing field to all investors.