For the ladies in Sindh, it will now cost an additional 10 percent to look all pretty and nice. Thats a part of Qaim Ali Shahs plans to increase provincial tax revenues; sales tax on services to be specific.
Presenting the Sindh budget this week, the Chief Minister said that his government will not raise GST on services to 17 percent but certain new services like beauty parlours (exceeding annual turnover of up to Rs3.6 million) and race clubs will be brought in the tax net. The beautician services will be taxed at the reduced rate of 10 percent.
This is indeed a good plan. Services like beauty parlours, tuition providers, clinics, boutiques, wholesalers and retailers of various consumer items, transporters, and pretty much the whole of small and medium service sector businesses do not pay income taxes or avoid sales tax. In other words those owing or managing these businesses are, euphemistically speaking, a burden on the society.
But while Shah did mention his plans to rope in some of these thieves, his speech failed to shed light on how exactly is his government is going to catch them.
That question aside, the fact that provincial sales tax on services will contribute only seven percent to the provinces total receipts - up from six percent in FY13 - speaks volumes about Shahs commitment to enable Sindh to stand on its feet.
Even poorer is the provinces performance on agricultural income tax. Shah plans to raise Rs468 million in farming income taxes - about one percent of provincial tax receipts (excluding GST on services). And this is despite the 10 percent increase in FY14 over last years budgeted amount. As a point of reference, bear in mind that Sindh collected about Rs427 million as farming income taxes in FY13, whereas its total budget allocation on agriculture was Rs9.7 billion.
The fact that Sindh and other provinces have not tapped on their own resources to raise taxes is partially responsible for their respective budget deficits, whereas that the budget speech also failed to stress on developing provincial capacities to collect more local taxes, is yet another disappointment.
After posting fiscal deficit of Rs16.5 billion in FY13, against the budget amount of Rs7.18 billion, Sindh has decided to post a deficit of Rs21.7 billion in FY14. That would be an increase of 32 percent - that is of course assuming that finance ministers of Mehran do not go overboard yet again.
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SINDH BUDGET AT A GLANCE
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Rs (bn) FY13-B FY13-A FY14-B
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Total resources: Of which 570.8 488.2 595.5
Federal Transfer 381.70 338.05 408.90
Provincial revenue receipts 96.7 100.6 119.8
Capital receipts 28.09 108.3 18.26
Total expenditure: Of which 577.98 504.7 617.2
Current 346.5 361.3 386.3
Development 181 97.5 185
Budget deficit 7.18 16.5 21.7
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Source: Sindh budget documents, FY13-14
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