Federal Minister for Overseas Pakistanis Dr Farooq Sattar said that for sustainable growth and political stability in the country government would have to prepare out-of-book and innovative budget. MQM's parliamentary leader was speaking at the Lahore Chamber of Commerce and Industry on Wednesday.
He said that the country at the moment is facing multiple challenges and the economic crisis is on the top of the list. Therefore, the government would have to come up with out-of-box solutions otherwise the very survival of the country is at stake. He said that it is not only the economic recovery that is direly needed at this point in time but measures are needed to make it sustainable for years to come.
Dr Farooq Sattar said that we would have to bring down the cost of doing business for making Pakistani goods competitive in the world market where they have lost their due place. He said that relief to the common man is the need of the hour and it is only possible if the common man is made part of budget making process. He suggested an increase of Rs 400 billion in direct taxes to deal with the challenge of fiscal deficit.
He said that they have proposed a reduction of 10 percent in defence budget and a sizeable cut in civil expenditure to overcome prevailing economic challenges. The additional collection of Rs 400 billion included Rs 100 billion through agriculture income tax, Rs 50 billion through Afghan transit trade, dealing with under-invoicing and smuggling Rs 50 billion and raising another Rs 50 billion by tax on agricultural trading. Improvement in monitoring, broadening the tax base and elimination of tax evasion due to corruption would generate another Rs 200 billion.
"Direct taxes are proposed to be increased from existing 32 percent to 45 percent and indirect taxes are proposed to bring down from 68 percent to 55 percent in the next fiscal year. He also proposed abolition of petroleum levy. It proposed an allocation of Rs 250 billion subsidies for the energy sector to resolve the problem of inter-circular debt and Rs 150 billion subsidy for food and fertiliser support to help revive the agriculture sector.
He proposed reduction in sales tax rate from 16 percent to 12 percent, reduction in maximum rate of import duty to 10-15 percent with minimum rate of 5 percent and abolition of the SRO system. He also proposed that there should be no sales tax and customs duty on machinery and raw materials essential for industries. Complete abolition of petroleum levy and a reduction in interest rates from 12 percent to 10 percent to facilitate revival of local industry.
Dr Farooq Sattar said that Rs 100 billion revenue losses on account of reduction in sale tax from 16 to 12 percent would be bridged through additional measures proposed for revenue generation. He said improving governance in State-Owned Enterprises (SOEs) would control losses in these entities, adding that these units should be revived through public-private partnership model.
He claimed that reduction in taxes as well as civil and defence expenditure would have a very positive trickle down effect on the common man, as it would reduce the fiscal deficit and, subsequently, inflation. Speaking on the occasion, the LCCI President Irfan Qaiser Sheikh said that the budget for the year 2012-13 must be focused on energy sector as country's economic revival hinges on availability of cheaper and uninterrupted power and gas supply. In order to tackle energy shortages, the government would have to allocate maximum funds for construction of dams/water reservoirs, tapping of Thar Coal, completion of Iran-Pakistan gas pipeline and establishment of LNG terminals.
He said that sufficient funds should be allocated in the forthcoming budget for Dasu power project, Diamer Bhasha dam, and Munda dam, Gomal Zam, Satpara power project and Kurram Tungi dam. At least Rs 200 billion or 10 percent of the total budget should be allocated for hydropower projects.
The LCCI President said that the country's reliance on costly thermal power is jacking up the cost of production and import bill. The country needs an urgent shift in its energy-mix in favour of hydropower and local fuels. The coal deposits of 175 billion tons amounting to $13 trillion in the international market, are enough to provide 100,000MW of electricity for 100 years. Uninterrupted and affordable power supplies can turn Pakistan into an economic powerhouse.
He said almost 70 percent of the total taxes collected in Pakistan are consisted of indirect taxes, whereas, the direct taxes are not more than 30 percent, that is totally against the practice in advanced economies where the ratio of direct taxes is 70 percent and remaining are indirect taxes. He said that the government needed to broaden the tax net by bringing the agriculture and the services' sectors into the tax net. He called for broadening of tax net by taking untaxed sectors into the tax net. He said that there are a number of sectors that should immediately be taxed instead of squeezing the existing taxpayers.
The LCCI president said that the culture of advance taxation should be done away with. He said that section 111 that is pertaining to whitening of money is discrimination with businessmen. Irfan Qaiser Sheikh said that in the upcoming budget, the government would have to curtail the rate of Turnover tax to 0.5 percent at the maximum from existing one percent.
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