ISLAMABAD, 23 April — Finance Minister Shaukat Aziz has a word of cheer for investors, corporates and taxpayers. “The government has decided not to impose new taxes in the next budget in order to offer certain reliefs to the people and encourage investment,” he has said in first authoritative word on the national budget that will be unveiled in June this year.
The rates of corporate taxes are likely to come down, too, besides a raise in the tax-exempt limit of personal income. “Rather we are planning to reduce the number of federal and provincial taxes,” he says, in an attempt to lift the economy out of the continued recession and provide relief to the people.
But, wait. Aziz is talking only about the “taxes.” It means burden may come from other sources. Remember, he has already said, separately, that the prices of utilities, electricity, gas, telephones, and the rest that have already become a nightmare for the people — may go up. And, in fact these will keep going up according to the agreement with the IMF and the finance minister, however, describes these utility price hikes as “adjustments” which, he says, will be made as and when the government desires.
Utilities, now for sometime, are being used as a major source of revenue gathering for the government and the state-owned entities who own these monopolies.
Economists and analysts are urging the government that in order to help an economic recovery, monetary policy should be loosened and taxes cut down. Let us hope Aziz keeps his promise of not to impose any new federal taxes. And, the government also restrains the provinces from levying them.
“We do not believe in increasing taxes, instead we are opting for gradually broadening of the tax base by bringing more people into the tax net,” minister says. But, this year’s tax survey that caused such a hue and cry by the business community, was able to net-in only 55,000 new taxpayers. That included those who volunteered to pay up. The number of taxpayers now has increased to 1.9 million, and will rise to 2.0 million by the end of the year, including government servants and salaried classes whose tax is deducted from their salary at source. There still are large professional classes, and categories of people, besides business, industry and the farming sector, who either do not pay, or get away only by contributing a fraction of what they should as taxes.
At the same time people, under the government’s new amnesty scheme, have declared Rs.125 billion as their hidden assets, on which they never paid any tax. It will mean greater taxable income for the country. Another scheme allows people to bring in any amount of foreign exchange from abroad. No questions about the source will be asked if the forex is brought in through banking channels — and not through ‘hawala’ or ‘hundi.’ The projected increase in tax collection, from various sources, should help out this cash-strapped government and reduce the budget deficit. But, more importantly, it should help it reduce, both the number of existing taxes and their high rates.
The people and the economy need it, so that it can come out of the trough, where it has been stagnating now for several years. Aziz has indicated that the government will reduce four federal taxes along with a number of provincial taxes. But, has not named them. Details will be unveiled in the budget in June.
