PRE-BUDGET — EXPECTATIONS
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
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
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
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
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
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.