ISLAMABAD: The government has said that floods over the past two years have caused losses of about $14 billion and indicated that withholding tax on luxury vehicles would be increased in the next budget.

At a pre-budget briefing, Finance Secretary Abdul Wajid Rana informed the National Assembly’s Standing Committee on Finance on Thursday that because of last year’s floods in Sindh the annual growth rate target was revised downward to 3.6 per cent, from 4.2 per cent of GDP set in the current budget.

But, he said that preliminary estimates of crop output had shown positive trends which could take the growth rate up to 4 per cent. Against the revised growth estimate of 1.5 per cent, he said, the agriculture sector could grow by 3.5 per cent because of bumper cotton and sugarcane crops.

According to a joint study conducted by the Asian Development Bank and World Bank, heavy rains and floods in Sindh and Balochistan were reported to have caused $3.7 billion loss to the economy while it would require about $2.7 billion to reconstruct damaged infrastructure and rehabilitate affected population.

Sindh is estimated to have suffered the most with 94 per cent of the total losses. Mirpur Khas, Badin, Tando Muhammad Khan, Umerkot, Mirpurkhas and Sanghar were the most affected districts.

Federal Board of Revenue’s chairman Mumtaz Haider Rizvi informed the meeting presided over by the committee’s chairperson Fauzia Wahab of the PPP that the government was considering to increase the rate of withholding tax on registration of new luxury vehicles from July 1. He did not elaborate the tax rates.

FBR member Shahid Hussain Asad said that under the proposal car manufacturers would recover the withholding tax from buyers by adding this levy in the car price to minimise tax evasion.

Currently, the government is collecting withholding tax from buyers, which is adjustable if they are registered taxpayers.

The withholding tax is already payable on the purchase of new vehicles, depending on the engine capacity. However, buyers ofbig cars are reportedly not properly paying the withholding tax. “We are making an attempt to ensure that the purchasers of big vehicles should pay the due amount of withholding tax,” said Mr Rizvi.

He claimed that the FBR was geared to achieve a tax collection mark of Rs2 trillion – Rs48 billion more than the target of Rs1.952 trillion set in the current budget.

Mr Rizvi said the prime minister had already announced that the budget would neither introduce any new tax nor increase tax rates. He said the next budget would be growth-oriented with emphasis on documentation, simplification of tax systems, cleansing of the statutory regulatory orders (SROs) and phasing out of federal excise duties and the government would focus on strengthening three major taxes – income tax, sales tax and customs duty.

He said the FBR would take steps to move towards documentation of the economy and broadening the tax base in the next fiscal year.

The growth-oriented budget would give priority to employment, industrialisation and investment. The objective of the simplification of taxes would be achieved through transparent, consistent and predictable systems, he added.