The Punjab government has agreed with donor agencies to 'broad tax base' in the province. Under second phase of Punjab Resource Management Programme, the tax structure and rates will be rationalised to increase annual provincial tax revenues by at least 14 percent in FY2006 and 16 percent in the budget for FY2007.
According to official sources, efforts for the collection of Agricultural Income Tax and the Urban Immovable Property Tax (UIPT) rates would be increased. The Excise and Taxation Department (E&TD) also formulate a policy to revise the tax assessment valuation table in every three years, based on the UIPT index assessment.
The revision to the valuations will take account of inflation and ensure that the tax base remains realistic and buoyant. Capacity development of the Board of Revenue (BOR) will ensure that the targets for taxation reform are achievable.
The Punjab government implemented major reforms to consolidate, restructure, and enhance collection of provincial taxes and other revenues to provide the basis for sustainable provincial revenue. The major result was an increase in provincial tax receipts in FY2004 by more than 44 percent in nominal terms, reflecting higher levels of provincial revenue-generating responsibilities as part of the overall devolution process in Pakistan.
The second phase of Punjab Resource Management Programme will continue to support reforms to strengthen provincial revenues.
In a recent report of Asian Development Bank, it has been pointed out that the Punjab's debt had increased considerably over the past decade, and there was an accumulated debt stock of Rs 162.6 billion at the end of FY2005.
A large portion of this, Rs 67.5 billion was financed by cash development loans with high interest rates (some above 17 percent per annum). Refinancing of liabilities was initiated through sub programme and so far Rs 5.76 billion of expensive cash development loans have been retired. GOP needs to implement its debt reduction strategy to make the debt burden more manageable and create fiscal space to re-prioritise its expenditures.
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