THURSDAY JUNE 16: Hafeez winds up budget debate in Senate: five-year tax holiday offered

ISLAMABAD: The government has offered five years' tax exemption to private sector for setting up new industrial units with a view to contributing towards growth and generating employment opportunities.
Winding up the budget debate in Senate on Wednesday, Finance Minister Abdul Hafeez Sheikh said that the principal role of private sector is job creation, and government's work is to facilitate them. "Any private sector that participates in new ventures will be given five years' tax exemption," he said.
The Minister stated that government's priority in the budget is to reduce fiscal deficit, which is major reason behind rising inflation in the country.
He said that fiscal deficit reflects gap between income and expenditure, and could only be reduced by controlling expenditure and increasing revenue. He said that the government plugs the fiscal gap by borrowing which leads to increase in inflation.
The Minister said that exports would register the highest growth of 25 billion dollars; remittances would go to over $11 billion; and foreign exchange reserves were likely to remain over 17 billion dollars. The allocations for development program were earmarked Rs 730 billion for the next fiscal year, and revised revenue collection target of Rs 1588 billion would be easily achieved, he added.
He assured the House that allocation for Benazir Income Support Program (BISP) would be considerably increased during 2011-12 and tax base would be broadened by bringing 0.7 million people into the tax net, of which 77,000 have been issued notices and 10,000 have already responded to the notices, and 1000 have paid taxes.
He said that the economy faced serious shocks during the outgoing fiscal year due to floods, ongoing war against terrorism, and high oil and other commodities' prices in the international market. He said that some decisions were taken in March 2011 to create resources in view of excess expenditure as well as to bring some exempted sectors into the tax net. At the same time, he said, freezing of current expenditure at last year's level and some other expenditure control measures helped in saving of Rs 20 billion. The development budget for the outgoing fiscal year was slashed considerably to contain the fiscal deficit. The government also distributed Rs 40 billion among the flood victims in the first phase.
The Minister said that unforeseen expenditure on account of domestic and external shocks had adversely affected the economy. As a result, growth dipped by 2 percent, and fiscal deficit went up to 5.3 percent, against 4 percent budgeted for the out-going fiscal year.