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The forthcoming budget will be carrying some good news for the tax payers besides various other relief measures

Apr 15 - 21, 2002

The trade and business circles are pinning hopes that budget for the year 2002-03 is likely to be a different document as compared to the previous budget in many respects.

They are expecting that the Finance Minister Shaukat Aziz who has got international recognition by winning the Euro money Award as the best finance minister of the year would also maintain his performance at the home front by presenting a people's friendly budget.

The basis for pinning hopes for relief is the improved economic and financial conditions of the government. It may be noted that the government has got rid of the much expensive foreign commercial loans costing huge debt servicing to the national exchequer leaving a very little space for the development projects in the budget.

The present government has repaid foreign debt worth $4.5 billion between October 12, 1999 and March 26, 2002 including high rate debt retirement of $1.4 billion during that period. As a result of this debt retirement and rescheduling the economy will have a 30 per cent relief from huge debt servicing year.

With the retirement of private foreign loans, successful rescheduling of Paris Club loan amounting to $12.5 billion and the improved reserves, it is generally expected that it will be a relief giving budget especially for the poor besides handsome allocations for next year's ADP.

While speaking at the pre-budget seminar organized by Management Association of Pakistan (MAP) in Karachi the Finance Minister indicated that the forthcoming budget will be carrying some good news for the tax payers besides various other relief measures.

He said that the budget would be free from any new tax and also from any increase in the tax rate.

The Finance Minister has also said that in order to facilitate the tax payers and to broaden the tax base, the tax system is being simplified and a large number of taxes at the federal level are being merged into a few taxes to reduce the number of various taxes. Shaukat Aziz also assured that the abolished wealth tax is not going to be reintroduced at all.

He indicated that the new tax law would provide 100 per cent self-assessment facility to the tax payers however 25 per cent of them would be liable to scrutiny or audit. The objective of the new tax law is to get rid of the deep-rooted ITO culture in the country. Some relief is also given to the salaried class by increase in the exemption limit, currently which is Rs60, 000 of the total income.

He said that the present government desires to do away with the advance taxes like presumptive or withholding tax and further reducing the tax rate if the tax payers responded to the government's efforts to enhance the tax net in the country.

The minister also said that an industry task force is working on the lines to bring our duty structure in accordance with globalization of trade hence the duty on raw material has to go down besides bringing the general duty rate from 35 per cent to 25 per cent.

Masoud Naqvi, President of MAP while talking to PAGE after the seminar said that one of the major irritants for the trade and business is the huge stuck up amount of the refunds creating problems for the trade in smooth sailing. He was of the view that government should take strong measures to resolve this issue to save the business community from uncalled for liquidity crunch due to non-payment of refunds. He feels that the economic reforms of the present government have started giving results at least at macro level and will come at downstream level also.

During the seminar, it was proposed that since that main thrust of the government was to expand the tax net, it is necessary that all types of income must be taxed irrespective of its nature whether it is from business, agriculture or salaries. Salaried persons need to be provided relief and as a first step, perquisites in the hands of salaried persons should be exempted from taxation.


The corporate rates of income tax should be further reduced for public companies to 30 per cent from 35 per cent and other companies to 40 per cent from 45 per cent. Tax on bonus shares should be removed as it discourages the companies enhancing its paid up capital.

Scope of withholding tax should be reviewed and the tax rate reduced to ensure smooth administration and eliminate confusion. Tax on Term Finance Certificates (TFCs) for individuals should be removed or as such be reduced to 10 per cent.


The private sector always makes hue and cry against the taxes and the collectors. The government side always comes with the promises that the system will improve and simplified. However at the end of the day things remain as usual with the exception of some cosmetic changes. Fundamental changes are required to enable the people to pay the taxes. Low rates and high turnover has always been proved a successful formula. Now is the time to clip the wings of the corrupt by introducing the simplest tax system. With a complex system it would not possible to bring a tax culture in the system. Days of honeymoon should come to an end now.