The government-elect may consider enhancing General Sale Tax (GST) to 17 percent to increase revenue collection along with other measures to broaden the tax base. Former Finance Minister and a key member of PML-N economic team, Sartaj Aziz while talking to Business Recorder stated that there is no doubt that Federal Board of Revenue (FBR) faces a considerable shortfall in projected revenue collection for the current fiscal year.
He questioned the advisability of a Presidential Ordinance helping meet the shortfall. He said the new government may consider these measures in budget proposals as a compulsion but more emphasis would be placed on direct taxes. Aziz admitted that increase in GST would fuel inflation in the country but the government-elect may have to take such a difficult decision as compulsion. He said that even existing 16 percent GST is relatively high as compared to 12 and 12.5 percent in other countries of the world. Sartaj Aziz said that Finance Minister-designate Senator Ishaq Dar of PML-N is involved in taking care of the next budget proposals.
Deputy General Secretary of PML-N Ahsan Iqbal reportedly stated that the money bill can only be passed by the assembly. Ahsan stated it was not in his knowledge whether caretaker government consulted his party with respect to implementation of tax measures through Presidential Ordinance. The FBR had proposed Tax Laws (Amendment) Ordinance 2013 to collect around Rs 150 billion from new taxation measures before the start of next fiscal year on 1 July. According to President's spokesman Farhatullah Babar, the Ordinance was returned by the President to the Prime Minister Secretariat without signing.
A senior official of Finance Ministry said fiscal deficit would be a major problem in the current fiscal year due to higher than expected subsidies to power sector and massive shortfall in revenue collection. He said the revenue collection by the FBR was expected to be Rs2,191 billion from the downward revised budgeted target of Rs2,381 billion accounting for the upward revision in fiscal deficit to 6.5 percent from the budgeted 4.7 percent.
The revenue collection target has since been further revised downward to Rs2,050 billion which according to tax authorities is also unlikely to be achieved and total collection may hardly reach Rs2,000 billion. On the other hand, the official on condition of anonymity said budgeted subsidies for the power sector on various accounts were revised upward to Rs291 billion from the budgeted Rs185 billion for the current fiscal year.
So far, he said the Finance Ministry has released Rs320 billion to power sector and current pace of demand for subsidies indicates that total subsidies may reach Rs400 billion. The revenue mobilisation is critically needed to contain the budget deficit in the current fiscal year otherwise it may cross 9 percent of the GDP, he concluded.
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