KARACHI: Finance Minister Muhammad Aurangzeb has said the government will provide relief to the salaried class at the first opportunity it gets.
“I also come from salaried class and one of the top taxpayers. I understand their pain and sympathize with them,” said Aurangzeb, referring to the high taxation on salaried class. The first opportunity we get, we will provide relief to them,“ he said.
“We have to make and take tough decisions for a stable and long-term economic growth,” he added.
Govt to see if it can ‘protect’ Pakistan’s salaried class further, says Aurangzeb
In an interview in Aaj News programme ‘News Insight’ with Amir Zia, he discussed the issues being faced by the economy and hoped that the country’s economy will improve in future.
“The economy has witnessed an improvement and the fact is that the current account deficit has been reduced, exchange rate stabilized, revenue jumped and foreign exchange reserves rose to $9 billion. These positive developments and improvements helped the State Bank to clear all foreign exchange backlogs in terms of profits and dividends and Letters of Credits,” Aurangzeb said.
Recently, the World Bank has approved $1 billion and IFC $400 million. These things need to be taken forward to get more foreign funding, he said and added that “we need the IMF programme to bring permanent macroeconomic stability.”
Funds worth $6 billion and more over three years from the IMF are important as it will endorse the stability in the country to encourage other donors to provide funds to Pakistan. This will also create the ability to take things forward and make Pakistan an investment destination for domestic and foreign investors, he maintained.
“For the IMF programme we are moving in the right direction and we are trying to ink the staff level agreement by this month. But, there are also some structural benchmarks, which we have agreed and will achieve over the period. On both sides there is a positive development and therefore we are confident that we will reach staff level agreement,” he said.
He said we need to increase the tax-to-GDP ratio from 9.5 percent to 13 percent. Energy sector reforms are also part of the structural benchmarks.
The minister said this (IMF Programme) is Pakistan’s programme, which is funded and supported by the IMF and nobody disagrees with these structural reforms. Pakistan is spending Rs1 trillion to cover the SEOs’ losses and there is need for saving this amount, he added.
“We have enforcement and policy gaps and to address these issues we are going for end-to-end digitization of the FBR,” the minister said.
When human intervention will be less, revenue leakages will be less and by reducing these leakages, revenue will increase. The FBR has already performed well and tax revenue showed 30 percent growth year-on-year in terms of establishing credibility, he said.
The situation will have to be taken towards end-to-end decentralization of the FBR because it will do two or three things. One is that revenue leakage will be tackled and second transparency created and trust deficit will be overcome. People don’t want to come into the tax net and they have agreed to pay more money outside the tax net. This is just because of trust deficit. If in any country the people should not trust on the tax authority, it is not sustainable, he added.
Structural reforms are very difficult task and unpopular decision, he said and added that it is very difficult to remove the political appointees from the distribution companies and bring in people from the private sector to improve the governance.
He maintained that there is Rs 500 billion theft in the power sector and this is because the structural reforms were not implemented. There is very little difference in the structural benchmarks of the previous three or four IMF programmes given by different ministers and governors, Aurangzeb said.
“We have focused on road-to-market, export growth, foreign direct investment (FDI) and access to the international capital markets and will work on these initiatives in next three years for a growth boost,” he added.
The privatization of PIA should have been done 10 years ago and now to clear the debt some Rs 600 to Rs 700 billion have been parked in other accounts, minister said.
Meanwhile, the finance minister said the government has taken measures which will compel non-filers to enter the tax net.
“This time, we have taken the margins provided to non-filers to a punitive level. So those who are non-filers must think three, four, five times why they are not coming into the tax net,” he said.
On the International Monetary Fund (IMF), the finance minister reiterated that a newer programme is crucial for the economic stability of Pakistan. “We need permanence in macroeconomic stability, which is why we seek the IMF programme,” he said.
On the industry side, he said for the first time exporters have been asked to come out of the presumptive tax regime and it will not be tax on export, its tax on income and if they are facing losses then there will be no tax. “Sales refunds up to June 2024 will be cleared in next two days to facilitate exporters,” he said.
The PSDP size has been reduced to Rs 250 billion. Two things have been kept on focus. First 81 percent of this allocation is for ongoing projects and 19 percent allocated for new projects. Secondly, it has been decided that most of the new projects will be economically viable.
Pension expenses are Rs1 trillion annually and in the first step we have decided new employees coming in the civil government will be moved towards a defined contribution, he concluded.
“We need to take the tax-to-GDP to 13% percent because this country cannot survive at 9.5 percent. Apart from this, there are sectoral reforms. We are reforming the power sector. We are also moving things towards outsourcing or privatization,” he added.
Inflation is 12-13 percent and the policy rate stands at 20.5 percent. Interest rates can be reduced gradually, the Finance Minister added.
Copyright Business Recorder, 2024
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