The Finance Minister Shaukat Aziz told newsmen in
Islamabad last week that the budget for the next financial year will
focus on investment and all necessary steps would be taken to achieve
this basic objective including the revision of tariff structure with
particular reference to smuggling prone items.
The Finance Ministry has kicked off the federal
budget 2004-5 exercise hoping to cut the number of taxes and rules
broadening the tax base and arranging more funds for development and
poverty alleviation programme.
At a special press briefing, the Finance Minister
described the erntours of the next budget. He declared that the next
budget would be investment-oriented for which the process of
consultation with stakeholders has already been initiated. All
Ministries, chambers of commerce, trade bodies, civil society
organizations and other sectors have been formally asked to send their
proposals directly or through press. Discussion and consultations would
be held at all the provincial and federal capitals afterward.
The Finance Minister disclosed that the government
will review the existing import tariff structure before the budget with
a view to further curtailing the rate of taxation specially on smuggling
prone items. The government was determined to curb smuggling and in his
view the best way to fight smuggling was through tariff reduction.
He also announced draft sales tax and customs rules
to automate the system on modern lines, with the introduction of green,
red and yellow categories of recipients. Pakistan reduced the maximum
customs tariff rate of 30 percent to 25 percent in July 2002, and number
of slabs were restricted to four, including 25, 20, 10 and 5 percent
The collection of customs duty has increased by 44
percent during first seven months of the current fiscal year, from Rs.
33.6 billion to 48.4 billion, despite a reduction in the effective rate
of duties. Higher levels of import, showing over 16 percent increase,
helped both customs duty and import related sales tax collection to go
up. The government collected Rs. 120.4 billion GST during July-January
period of the current fiscal year, showing over 10 percent growth.
Overall tax collection during this period totaled Rs. 274.2 billion
against Rs. 238.64 billion of the corresponding period of the last
fiscal year, showing 14.9 percent increase.
Aziz announced that the government is intent to curb
the menace of smuggling though various initiatives. Pakistan's porous
borders with Afghanistan (2150km), Iran (775km), India (2250km) China
(1200km) and coastal belt (950km) are said to be the haven for various
smuggling rackets, which move around scot-free. When the military took
over in 1999, it announced a crackdown to eliminate "bara
markets" in all major parts of the country, but backed out after
severe resistance from the racketeers. Since then no action has been
taken against smuggling despite existence of a huge market of smuggled
goods in the very heart of the capital Islamabad, and across the GHQ in
Rawalpindi. Aziz indicated that the government would deal with the issue
through rationalization of customs duties on smuggling prone items.
There is no official estimate on the precise quantum
of smuggled good in the country. Various independent studies show that
the country loses between Rs. 35-00 billion per annum on account of loss
of revenue to this illegal trade. Aziz said the government would check
smuggling taking place through the diplomatic channels.
He said 'Economic Survey 2004-05" would be
released before the budget, with expected over 5.3 percent GDP growth as
indicators show that most of the targets are within grasp. He said that
only wheat crop figures were to come whereas cotton was likely to cross
10 million bales, lower than production target. Sugarcane crop was
bumper, nearing 3.8-4.0 million tons higher than last year's production
by 3.6 percent. Rice is also showing value addition production. Wheat
has started coming form Sindh, while Punjab production is yet to be
In industrial sector, large-scale manufacturing has
registered 14.7 percent growth in six months; tax collection is around
15 percent higher than last year. There is 23 percent increase in
machinery import. Simultaneously, the private sector credit off take is
around Rs.215 billion against Rs.74 billion of last years.
This is good of the Finance Minister that he is
sharing with the people information relating to budgetary proposals. It
is undeniable fact that the budget impacts on the life of each and every
citizen in one-way or the other. With this in view, it is incumbent upon
the government to make its intentions known well before announcement of
the budget so as to get feedback for possible incorporation. However,
the budget making process remained a closely guarded secret until a few
years back and the credit goes to Mr. Shaukat Aziz for introducing the
element of transparency in it. It is a welcome declaration of the
Minister that the new budget would be growth and investment-friendly. He
has also indicated that while it will be effort of the government to
broaden the tax base, the number and rates of taxes would be curtailed
to facilitate the taxpayers. Growth and investment is directly linked to
our performance in agriculture and the pace of industrialization, which
have not picked up despite incentives by the successive governments.
Devising attractive packages for corporate farming and electronic,
electrical, telecom and IT sectors can bring about a change. By doing so
we will not only be meeting our own requirements and tackling the
problem of growing unemployment but can also significantly increase our
exports. Similarly, there should be a quantum jump in allocations for
education, science and technology, and research and development to
sustain the pace of economic development on long-term basis.
Finance Minister is also reminded of his unfulfilled
promise about de-freezing of house rent and other allowances of the
government employees. Government claims notwithstanding, rising
inflation has eroded their purchasing power and it is utter injustice to
pay them allowance on the basis of old scales. Financially, the
government is quite comfortable and therefore, it is time to provide
relief to the poor in line with oft-repeated claims of the President,
the Prime Minister and the Finance Minister. One way to do this would be
to eliminate or lower taxes on electricity, gas and petroleum products.