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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
23,360
6524hr
Pakistan Cases
1,029,811
4,95024hr
8.46% positivity
Sindh
380,093
Punjab
356,211
Balochistan
30,289
Islamabad
87,304
KPK
143,673

ISLAMABAD: A day after unveiling the budget, Finance Minister Shaukat Tarin on Saturday described the Federal Board of Revenue (FBR) tax target of Rs5.829 trillion for the next fiscal year as "realistically aggressive".

Addressing the post-budget press conference along with Minister for Industries and Production, the adviser to the prime minister on revenue, and the special assistant to the prime minister on finance and revenue as well as the chairman FBR, Tarin said that if Rs5.8 trillion revenue target was materialised, it would create fiscal space for the government to utilise the resources in the agriculture sector.

The finance minister said he was serious to reform the FBR and would not tolerate any resistance. "If the FBR did not change itself, I would change them," he added.

The minister said the agriculture sector would be the first priority of the government followed by industries as after agriculture, industry is the second most important sector that provides employment to people.

He stated that the government has requested the International Monetary Fund (IMF) to extend the amnesty scheme for the construction sector for another six months, as the incentive package is going to expire on June 30, 2021.

He said the scheme was announced at the request of the construction industry. "In my opinion, the scheme would continue for another few months," he added.

The minister said the discussion with the IMF is ongoing and the government would try to complete the sixth review by September, if not by July 2021.

He said the IMF has been asking the government to increase 45 percent electricity tariff and 100 percent in personal income tax, which was not possible for the government to overburden the people.

He said the government has other options as well, including raising money from the capital market for budgetary support. He said that taxes have been abolished to facilitate Chinese investment in the Special Economic Zones (SEZs) to increase the exports as the country requires foreign exchange for repayment of money borrowed under the China-Pakistan Economic Corridor (CPEC) project.

To increase exports and support the local industries for import substitution, he said that duties have been abolished on almost all the raw materials.

Additionally, he said, incentives being provided to SMEs would help achieve higher industrial growth. The finance minister expressed the confidence that the revenue target of Rs4.7 trillion set for the current fiscal year would be comfortably achieved.

"We have to enhance the tax-to-GDP ratio to 20 percent in seven to eight years," he said adding that the government's focus is to bring more people into the tax net instead of imposing more taxes on people already paying taxes.

He further stated that the tax target for the next fiscal year would be materialised through an innovative approach, including the use of technology.

He clarified that there was some confusion with respect to charges on mobile calls, SMS, and internet data usage, and stated that the federal cabinet did not approve the proposal to enhance charges of SMS, mobile phone calls and internet, so that proposal was withdrawn.

Sharing strategy to generate Rs242 billion through the enforcement measures, he said that the FBR can generate Rs75 to Rs100 billion from at least one million potential persons operating out of the tax net. Based on electronic data, the FBR will verify expenditures and document un-registered persons.

The additional tax deposited with returns was Rs52 billion compared to Rs34 billion during the last year,reflecting an increase of 55 percent. The quantum of retail sales is more than 1.7 trillion.

Even if we charge reduced rate of sales tax from point of sales (POS) of big and medium size retailers, the FBR has estimated to collect another Rs100 to Rs150 billion from retail sector. Last year, the FBR collected Rs160 billion from enforcement measures.

About the lottery scheme, he stated that the government would initially offer prizes of Rs25 million to the consumers for participating in the lottery scheme from August 2021. The consumers would demand the retail outlets provide printed/documented receipts to participate in the lottery scheme.

The amount of prize would be raised to Rs1 billion per month taking the total to Rs12 billion in one year. The consumers would "force" the retailers to give documented receipts, which would increase registration of the POS with the FBR system.

The FBR cannot depute tax officials at each retail outlet to daily check transactions, but the consumers will themselves pursue the retailers to provide printed receipts.

About reforms in the FBR, the finance minister stated the private sector would be engaged to help the FBR in broadening the tax base with the help of technology. The FBR and the private sector would work together to bring new taxpayers into the tax net.

The FBR will use digitisation for broadening the tax base, he stated. Asked about reasons for heavy reliance on indirect taxes, he stated that developing countries have to depend on indirect taxes till broadening the tax base.

He quoted the example of China "which 70-80 percent relies on indirect taxes."

To a question on 'health levy', he said the 'heathy levy' is under consideration, "but we do not want to intervene into the domain of provinces."

The minister held out assurance that inflation would remain below eight percent in the next fiscal year.

The finance minister ruled out the possibility of a mini-budget. He said the PSDP has been enhanced significantly to take the country towards sustainable growth.

The minister emphasised the importance to increase the tax-to-GDP ratio to 20 percent in the next seven to eight years. The minister said the construction sector has started picking up and the power sector has been provided subsidies as per their requirement and it is being provided an additional Rs370 billion in the next fiscal year and now they have to improve their efficiently and reduce losses.

About petroleum levy collection of Rs610 billion in the next budget and its inflationary impact, the finance minister said that a broader understanding with Saudi Arabia has been reached for the revival of oil on deferred payment facility, which would help the government not to increase the petroleum levy.

The minister said that a committee would be formed on National Finance Commission (NFC) award that how to increase the tax-to-GDP ratio as it was agreed in the last NFC award that the tax-to-GDP ratio would be increased to 20 percent in 10 years.

Tarin further emphasised to increase savings and investment for achieving sustainable growth, and stated that the biggest challenge for the country has been shortage of revenue, which are required to be increased to 20 percent of the GDP, and the government wanted to achieve this level in the next six to eight years. He said four million poor households after identification through the Ehsaas Survey would be provided interest-free business and farming loans.

He said these households would also be given loans to build their own houses besides governing health cards. One member of each family will be imparted technical training.

The finance minister said incentives have been provided to the agriculture and industries. He said the incentives in the industries are not only being given to textile but also extended to different sectors.

Dr Sania Nishtar said that Rs260 billion has been earmarked in the next budget for Ehsaas Programme and six-month instalment of Rs12,000 would be increased to Rs13,000 under Ehsaas Kifalat Programme.

She said the Ehsaas Emergency Cash Programme's next phase would commence from the upcoming week, which will benefit over 10 million people. Nishtar said scope of Ehsaas Waseel-e-Taleem Programme has been expanded from primary to secondary and higher secondary level, and now children studying in these levels can also benefit from this initiative. She said 65,000 scholarships for undergraduates will be given during the next year.

Copyright Business Recorder, 2021