Last update: Thu, 30 Jun 2016 10pm

BR Research: All


This column last week talked about the increasing gap between indirect and direct taxes (a ratio of 6 to 4) and governments reliance on withholding taxes that are part of income taxes but indirect in nature. And these particular taxes are only increasing. Meanwhile, the incidence of the narrow tax base is tilted on telecom, banking and power distribution sectors whereas large contributors to GDP mainly agriculture, wholesale, retail and real estate pay negligible taxes.
The finance czar of Sindh, while presenting the provincial budget of 2016-17 season made two critical statements. Firstly, he took the lead from the leader of the opposition and strongly criticised the federal government rightfully for its unwillingness in announcing the 9th NFC Award.
Cement and steel that make up 40 percent of the total cost of construction material will both see an increase in prices after the budget announced last Friday. The federal budget allocated a FED of Rs.1/kg on a 50-kg cement bag that was previously five percent on the retail price. The current retail price of cement ranges between Rs480 to Rs530 per bag in the domestic market which is already significantly higher than cement prices in Iran, India or the UAE.
The Punjab government in its budget for 2016-17 has allocated Rs550 billion for its Annual Development Plan (ADP). A standing out feature in this years ADP is the increased allocation for the water and sanitation sector at Rs45 billion, marking an increase of 88 percent over last years allocation of Rs24 billion. The majority of the expenditure is targeted towards the Punjab Saaf Pani Company, the brain child of Punjabs chief minister Shahbaz Sharif. The company has a mandate to develop, plan and execute projects for providing safe drinking-water solutions that focus on prioritising underserved areas, especially in rural and peri-urban areas of the province.
Sindh's own tax collection grew about 14 percent in FY16, and is budgeted to grow another 23 percent to about Rs154 billion in FY17. Does that merit a pat on the back? This column argues not.
True to its steady form, the Norwegian operator is marching on. Having made the difficult decision earlier this month to (successfully) bid for a 10MHz spectrum block - mind you, at a splendid capital cost of $395 million - Telenor Pakistan has signalled that it has the heart for the fight that looms ahead.
In an exercise of 'we told you so,' recall that on May 6, 2016 this column had highlighted how fears of various taxes due to be implemented on trading and investment activities, and the actual announcement of those taxes in the budget, is unlikely to make an impact PSX equities. It turns out that has exactly been the case.