PRE-BUDGET VIEW FROM LAHORE
June 04 - 10, 2007
Sustaining economic growth, provision of basic facilities, improving the living standard of the people, encouraging agriculture and industry and bringing the under-developed areas at par with the rest of the country were the major objectives of the budget 2007-08.
This indicates that while emphasis on investment and growth will be continued in the budget, it will particularly focus on bringing fiscal policy provisions that aim at providing the promised relief to the people, according to sources in the Ministry of Finance. Prime Minister Shaukat Aziz has already announced the budget 2007-08 will provide relief to the common man and there will be focus on social sector.
According to the latest available data, the rate of inflation was 11 percent, compared to the same month last year. The increase in food inflation is said to be still higher, which the government had tried to bring down by allowing duty-free imports of some essential food items. The problem of inflation, which particularly hits the poor and middle-income groups, should be comprehensively addressed. In addition to fiscal policy measures to contain inflation, there is need for the State Bank to tighten its monetary policy for this objective to be achieved, economic analysts said.
During the next financial year, the sources in Ministry of Finance said that second-generation reforms will be introduced and the budget is expected to strengthen poverty-alleviation measures, improve infrastructure facilities, create conditions for opening up new job opportunities and accelerate social-sector development.
The living conditions of one-third of the population of the country, which is living below the poverty line, ought to be improved, through both achieving high economic growth and direct poverty-alleviation programmes, they added.
Over the last five years, the sources said that the government first achieved macro-economic stability through introduction of basic and structural reforms in the economy. Financial discipline was introduced and the debt burden was reduced. The budget deficit was brought under control. The balance of payments situation was improved. Following that, the focus on accelerating the growth process has started giving dividends. This year's growth in gross domestic product is projected at 8.35 percent. In view of this encouraging performance of the economy, it cannot be unexpected for the common man to expect some of this benefit reach his or her door step.
According to Advisor to Prime Minister on Finance, Economic Affairs and Revenues, Dr. Salman Shah the upcoming budget 2007-08 would focus on social sector development including health education, human capital development and poverty reduction. "Untiring efforts will also be made to facilitate the common man, government employees and pensioners in the upcoming budget 2007-8", he added.
According to him, focus in the budget will be on the common man while the government has already introduced various schemes and micro finance loans facilities to set up business of their own for earning an 'honest' livelihood for their families. The government would create employment opportunities through skill development programmes and infrastructure development in the country would further be strengthened.
He was of the view that prudent economic policies and investment friendly environment has helped attract US $ 6 billion Foreign Direct Investment in various sectors of the economy this financial year.
The Association of Certified Chartered Accountants (ACCA) ACCA Pakistan recently submitted its budget proposals to the Central Board of Revenue. ACCA Pakistan's recommendations focus on a fair tax regime having fair direct taxes, indirect taxes, environmental taxes, social security system as well as mechanisms to develop tax culture. In order to sustain the high level of investment rates experienced in the past and to attract foreign investment in the country, ACCA Pakistan proposed reduction in the flat 35% corporate tax rates. As compared to other countries in the region (Afghanistan: 20%, Bangladesh: 20%, China: 33%, India: 33.66%, Indonesia: 30%, Malaysia: 28%) Pakistan does have considerably high corporate tax rates. ACCA Pakistan also recommended special allowances for infant companies. It also proposed a gradual adoption of capital gains tax allowing for large gains on land holdings, property and shares to be taxed. ACCA Pakistan recommended that CBR broaden the tax base and increase revenue collection from agricultural income. ACCA Pakistan also proposed a reduction in the Sales Tax rate to 10 percent to lessen the burden on end consumer and help reduce inflation. ACCA Pakistan strongly supports the government's determination to deal with environmental pollution, and recommended the adoption of tax measures to deal with environmental problems. The ACCA Pakistan proposed the idea of levying a small Green Tax on plastic bags. In addition to green taxes, it also recommended that the government should assign quotas for emission of greenhouse gases using carbon credits.
A carbon credit is a tradable permit scheme, which gives the owner the right to emit one tone of carbon dioxide. Businesses that produce emissions, which is over the quota assigned to them, they must buy carbon credit for their excess emissions. ACCA Pakistan is also of the opinion that appropriate tax incentives should be given to help develop Pakistan's environmental industry and to raise awareness of environmental protection. In order to ensure a more equitable tax regime, ACCA Pakistan proposed a social security system where there are special tax exemptions for widows, single women and elderly citizens.
Dr Afra Sajjad, Head of Policy Department said that the Association of Chartered Certified Accountants is the largest and fastest-growing global professional accountancy body with 296,000 students and 115,000 members in 170 countries. We aim to offer the first choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management, she added.
Muhammad Arshad, Head of Internal Audit and Taxation, First Fidelity Leasing Modarba told the author of this article that structural deficiencies, sector wise imbalances, political interference/ exemption, misuse of tax money, short term policies, lack of meaningful information, cumbersome procedures are some reasons for low tax revenue and compliance.
In his proposal on real estate taxation, he suggested that CVT must be replaced with Capital Gains Tax while provincial stamp duty and other charges should be slashed. He endorsed CBR's proposal to levy agriculture tax on income instead of land holding. He proposed that agriculture income tax numbers should be issued to taxpayers. He also proposed that section 111(4) of income Tax Ordinance should be amended to stop its misuse by 'Hundi System' users.