SUNDAY MAY 22: Centre, provinces need to target those circumventing laws: Finance minister hints at new taxation measures

KARACHI: There are five governments in Pakistan - one federal and four provincial - working under the Constitution, who have to work collectively to ensure broadening of tax base and also collect tax from those who should be paying and are not contributing to the society, said the Federal Finance Minister Dr Abdul Hafeez Sheikh.
In a meeting held with the representatives of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and Karachi Chambers of Commerce and Industry (KCCI) at the State Bank of Pakistan Governor's residence, in Karachi, on Saturday he said there are only three ways to collect tax on income from agriculture. According to him, this levy exists on the statutes but is not collected as it should have been by the provincial governments. The second option available to the provincial governments is to ask the Federal Board of Revenue to collect tax on agriculture income on their behalf against a fee. And, third way is for the Parliament to amend the constitution.
Further, he said, it is not only the collection of this tax on agriculture income much below the potential, so is also the collection of Capital Value Tax on big houses in urban areas. This too is a provincial tax and the same weakness applies in this case.
The Federal Minister said that there are limitations on what the Ministry of Finance can or cannot do. "We can provide the funds for an effective mechanism to improve law and order but it is the responsibility of the provincial governments to protect life and property of the citizens". Similarly, the finance ministry can provide funds to address the issue of circular debt afflicting the power sector. Improvement in the delivery of electricity and reducing line losses and providing uninterrupted power lies with the utility companies under the jurisdiction of the Ministry of Water and Power.
He called upon the business community to press harder for privatisation of loss-making public sector entities at every forum. The Finance Minister refrained from commenting on prevailing interest rates and exchange rates and said only Governor SBP can speak on these two sensitive subjects. He said that in FY11, finance ministry was able to contain expenditure and save over Rs 20 billion in non-development expenditure after freezing them at last year's level (except for salaries and wages).
He clarified that reports of no new taxes are premature and all options are on the table. "We will endeavour not to burden existing taxpayers with higher taxes. But this does not mean we will not exercise option to collect taxes from those who should be paying and are not contributing," he added. The minister solicited ideas from businessmen on how to plug revenue losses due to smuggling, under-valuation of imports and improving the tax collection rules and mechanism. He said we need to shun the tendency of asking the government to collect tax from everyone except them. Governor SBP Shahid H. Kardar said that with the exception of one or two countries lending rates are higher than inflation numbers across the world. He rejected the rumours about rupee depreciation next year.