The Muttahida Qaumi Movement (MQM) on Sunday unveiled first-ever shadow federal budget envisaging an outlay of Rs3.61 trillion for the next fiscal year, proposing an increase of Rs400 billion in direct taxes to deal with the challenge of fiscal deficit.
MQM's parliamentary leader Dr Farooq Sattar unveiled the shadow budget at a local hotel during a press conference. The party proposed a reduction of 10 percent in defence budget and a sizeable cut in civil expenditure to overcome prevailing economic challenges. The additional collection of Rs400 billion included Rs100 billion through agriculture income tax, Rs50 billion through Afghan transit trade, dealing with under-invoicing and smuggling Rs50 billion and raising another Rs50 billion by tax on agricultural trading. Improvement in monitoring, broadening the tax base and elimination of tax evasion due to corruption would generate another Rs200 billion.
The additional revenue generation would help bring the fiscal deficit down to Rs575 billion from Rs1.143 trillion for the current fiscal year, Dr Farooq Sattar said. He said that a defence budget has been proposed to the tune of Rs450 billion in 2012-13 from Rs495 billion for the current fiscal year. The party, he said, would primarily focus on increasing direct taxes to narrow down the disparity between direct and indirect taxes.
Highlighting the party's distaste over indirect taxes, he said that the MQM proposed equity in taxation system for direct to indirect taxes. "Direct taxes are proposed to be increased from existing 32 percent to 45 percent and indirect taxes are proposed to bring down from 68 percent to 55 percent in the next fiscal year. The MQM also proposed abolition of petroleum levy.
It proposed an allocation of Rs250 billion subsidy for the energy sector to resolve the problem of inter-circular debt and Rs150 billion subsidy for food and fertiliser support to help revive the agriculture sector.
The shadow budget proposed an allocation of Rs50 billion for Benazir Income Support Programme with Rs25 billion for BISP and Rs25 billion for Benazir Income Generation Programme to help poor families set up their own businesses through non-governmental organisations and small- and medium-scale enterprises.
Farooq Sattar said that an outlay of Rs3.61 trillion for the next fiscal year "is 30 percent higher than the budget for the current fiscal year with resource availability estimated at Rs3.21 trillion against Rs2.951 trillion for the outgoing fiscal year".
Net revenue receipts for 2012-13 have been estimated at Rs1.425 trillion, indicating an 18 percent increase over 2011-12 and provincial share in federal revenues has been estimated at Rs1.51 trillion, 25 percent higher than 2012-13.
The overall expenditure during 2012-13 has been estimated at Rs2.805 trillion out of which the non-development budget is Rs2.315 trillion and a development budget of Rs500 billion. The non-development budget shows a decrease of 1 percent over the estimates of 2011-12 while development budget has increased by 10 percent over the estimates for 2011-12.
The shadow budget proposed reduction in sales tax rate from 16 percent to 12 percent, reduction in maximum rate of import duty to 10-15 percent with minimum rate of 5 percent and abolition of the SRO system. It also proposed that there should be no sales tax and customs duty on machinery and raw materials essential for industries. Complete abolition of petroleum levy and a reduction in interest rates from 12 percent to 10 percent to facilitate revival of local industry.
Dr Farooq Sattar said that Rs100 billion revenue losses on account of reduction in sale tax from 16 to 12 percent would be bridged through additional measures proposed for revenue generation. He said improving governance in State-Owned Enterprises (SOEs) would control losses in these entities, adding that these units should be revived through public-private partnership model.
He claimed that reduction in taxes as well as civil and defence expenditure would have a very positive trickle down effect on the common man, as it would reduce the fiscal deficit and, subsequently, inflation. He said that the price of 20kg wheat flour bag would come down to Rs300 from Rs600 and other essential commodities such as gram pulse price from Rs115 to Rs80.5 per kg following the implementation of measures proposed in the shadow budget.