Budget 2020-21: There is no room for additional taxation: Pasha

There is no room for additional taxation in the next budget as an additional taxation of Rs735 billion in the current budget has already ruined the economy, said renowned economist Dr Hafiz Pasha.

Talking to Business Recorder, he said the government should immediately restore the zero-rating facility on exports if it has a cushion of Rs 100 to 150 billion in the next budget, especially when the world markets are shut and export orders are being canceled one after the other.

Secondly, he said, a system of fixed taxation should also be extended to the traders' community which should be simple and without the harassment of tax collecting machinery. According to him, the deduction of withholding tax on the electricity bills should also be withdrawn for small traders, at least for the next one year.

He said the tax concessions would lead to an increase in the budget deficit. Therefore, it is a question of crucial importance that up to what extent the IMF is ready to accept the budget deficit, especially when the fate of the second review of the existing IMF programme is hanging in the balance.

He termed it a 'big mistake' of the government to increase the revenue target by 40 percent on the "IMF pressure" when the economy was growing at 2 to 3 percent. He apprehended that the FBR would be able to collect nearly Rs4000 billion revenue against the original target of Rs5550 billion, registering a historic shortfall of Rs1500 billion.

He said coronavirus is the latest development, and the FBR was already facing a shortfall of about Rs700 billion during the first nine months of the current fiscal. The government would have to reduce the tax burden in order to let the economy grow, he added. Dr Pasha said there is an urgent need for controlling expenditures.

A major feature of the next budget has to be a well-defined economy in terms of current expenditure where a cut of Rs600 to 700 billion should be ensured at any cost. The budget should focus on cutting expenditures on the current side and raise development spending if there is a margin to do so, and that too be spent on the intra-province development schemes. It would save approximately Rs200 billion of the federal government, he added.

He said the government should close down 15 to 20 divisions of existing ministries which are overlapping each other's functions, and hand over the task of coordination to the Planning Commission. Similarly, he said, the non-salary operating cost like stationery, fuel, vehicles, and gifts, etc. should be minimized. The operating cost of the federation, excluding salaries, is Rs930 billion per annum and a saving of 15 percent can easily be ensured on this front.