In the first high level meeting on Wednesday, the government economic managers presented to Prime Minister, Syed Yusuf Raza Gilani, firm-up budgetary projections showing 15 percent increase in budget size and revenue collection to take them to Rs 2.25 trillion from Rs 1.874 trillion and Rs 1.12 trillion against revised target of Rs 990 billion respectively for 2008-09.
The meeting was informed that fiscal deficit target for the next year would be 4.9 percent against 6.5 percent of 2007-08. Sources said the budget makers gave the Prime Minister a detailed presentation on next year's budget to apprise him of the work done so far and take his advice in finalising them for the National Economic Council (NEC) for approval. Before taking the budgetary projections to the Prime Minister, the Economic Advisory Council (EAD) gave its view-point on it in a meeting chaired by finance minister, Syed Naveed Qamar.
The EAC proposed that the federal government should make some structural changes to make the provinces active in generating revenue from potential areas, besides focusing on tapping the agriculture sector potential to generate more revenue in 2008-09 to make more funds available for the developmental projects.
It also suggested to remove deemed duty with a fixed profit margin for the refineries to project the interest of all petroleum sector stakeholders.
The council suggested the government to bring real estate business in the tax net by imposing 4 to 5 times tax on enhanced value. It was also for imposing capital gain tax on share trading.
This is for the first time that the issue of taxing real estate and share trading is being given due consideration. It's objective would be to broaden tax base and help the FBR get ambitious projected revenue collection target.
The IMF and World Bank had in separate meetings with the government officials held in Islamabad during the last one week or so asked to bring the real estate business and share trading into tax net to generate more revenue and cut down fiscal deficit down to meet the target. These two international donors want Pakistan to bring fiscal deficit down to 4.2 or 4.3 percent by the end of 2008-09.
The Public Sector Development Programme (PSDP) size could not be finalised due to controversial views of the Ministry of Finance (MoF) and Planning Commission. These two key government departments were told that the controversy over PSDP size will now be sorted out by the Prime Minister probably in a couple of days and they will be informed accordingly.
The Prime Minister asked the budget makers to provide relief to the poorest of the poor who are facing back breaking hardship due to high food inflation and shortage of power and other essential goods is the real objective of the elected government. He said that the government is committed to making a sizeable allocation in the budget for direct income support to the poorest and vulnerable groups.
The government is likely to link availability of research and development (R&D) funds with value addition to make this facility available for practically active parties.