Economic team expresses inability: bringing agriculture sector, real estate, bourses'' deals into tax net

The country''s economic team has expressed helplessness before Prime Minister Yousuf Raza Gilani to bring agriculture, real estate and stock exchange transactions into the tax net.
Sources said that the Advisor to Prime Minister on Finance, Dr Abdul Hafeez Sheikh, and former Finance Secretary Dr Waqar Masood during a briefing to the Prime Minister on economic situation warned that the problem of fiscal deficit would remain a major challenge due to the low tax-to-GDP ratio largely because of some influential sectors remaining out of the tax net. The economic team was quoted as saying that low tax-to-GDP ratio, of around 9 percent, was the major reason for economic problems, with very little or almost no hope, that agriculture produce, property, and stock exchange transactions would be brought into the tax net due to difficulty in achieving a political consensus.
The PM was given a very bleak picture of the economy, especially challenges on the fiscal side, with risks of realisation of estimated revenue on account of receipts from Coalition Support Fund (CSF), sale of 3G licences, and from Etisalat for privatisation of Pakistan Telecommunication Company Limited (PTCL). Achieving Federal Board of Revenue (FBR) target of Rs 1952 billion, 25 percent higher than the actual revenue collection of Rs 1,558 billion for last year, was increasingly viewed by the economic managers as at risk as well as slippages on budgetary allocation for subsidies on electricity and budget surplus from the provinces.
The economic team was quoted as saying that, on the expenditure side, almost all revenue available to the federal government (after transfer of revenues to the provinces) is spent on interest repayment (interest on loans), and Defence, and the government has to borrow to pay salaries of its employees, operate government ministries/provide services, pay subsidies on electricity, income support programme, flood relief measures, provincial grants other than NFC, and public sector development programme.
The Prime Minister was informed by Waqar Masood that fiscal discipline was very important in a country like Pakistan because fiscal imprudence quickly translates into decrease in foreign reserves. He added that in 2007-08 the fiscal deficit of 7.6 percent of GDP was one of the main reasons that compelled the country to go to the International Monetary Fund (IMF) for a bailout package in support of the country''s balance of the payment position.
The Prime Minister was informed that the factors likely to fuel inflation in the coming weeks are as follows: (i) increased domestic borrowing by the government; (ii) wheat procurement support price increase to Rs 1050 per maund from Rs 950 per maund of last year; (iii) the increase in petroleum prices as a consequence of increase in the international market; and (iv) CNG supply being regulated by the government, accompanied by reduced gas pressure that is forcing consumers to switch to the more expensive petrol.