ISLAMABAD, 13 May — There is good news for foreign and domestic investors, as well as the over-taxed corporate sector and the men and women who operate it.
The budget for fiscal 2003 that starts July 1 will be kind to the over-taxed and helpful to investors from home and abroad.
Under consideration, too, are additional incentives for expatriate Pakistanis working particularly in the Gulf, Saudi Arabia, Middle East and North America. An indication of what will the budget for 2003 have in store for various business interests and people has just been provided by Finance Minister Shaukat Aziz. The budget to be unveiled around middle of June, is currently under preparation in the Ministry of Finance (MoF).
"The budget will be tax-free and investment friendly," Aziz says. This is music to the ear of all interest groups — investors, corporate executives, industrialists, exporters, importers, large and small businessmen — if the finance minister sticks to his promise. It is a difficult task to keep up such a promise because the overall picture is not that rosy, as the economy continues to be in recession, despite a slight easing. A plus point is that the budgetary deficit has narrowed from an average of seven percent to five percent of GDP. Aziz, however, feels comparatively comfortable with the country’s constant headache of poor state of balance of payments.
The current account deficit has now improved from an annual average of five percent to a surplus of 2.8 percent of GDP. It improved as a result of increased inflows of fresh foreign assistance as the Western donors and International Financial Institutions (IFIs) have coseyed up to Islamabad in the wake of the war on terrorism.
But, the most heartening of all is doubling of home remittances sent by expatriate Pakistanis from the Gulf, Saudi Arabia, and North America.
The amount has doubled to $1.4 billion in the first eight months of the current fiscal 2002. Bankers estimate the year is likely to end on June 30, with remittances totaling $2.0 billion — a record, for the current decade.
The finance minister will have to generally stay his hand on fresh taxation in order to stabilize the economy that is likely to experiences the ripple effect of the just-concluded presidential referendum that Gen. Pervez Musharraf has officially won.
The referendum, Gen. Musharraf has been saying, will stabilize the economy and ensure continuity of the reforms, his government is undertaking.
The economic scenario, as of now indicates that Pakistan is looking up, although a high degree of buoyancy is nowhere insight. In view of this, and in order to propel growth, and to assure people at home and abroad, Aziz pledges "no new taxes will be levied in the new budget." "The economic policies of the government and the direction fixed in the budget for current fiscal 2002 will be sustained. People should feel no anxiety as no new taxes will be imposed in the coming budget," says Aziz.
The government’s improved outlook on the situation is based on the fact that tax collection in 2002 was 11 percent up. Efforts to improve it further go on, by making the tax system easier. In future a very large number of people will pay taxes on a self-assessment basis without any inconvenience. The interaction between the taxpayers and tax officials that has already been reduced, will be minimized. This should help reduce corruption and prevent harassment of taxpayers.
Another area of interest to foreign exporters to Pakistan, as well as industrialists and importers is that a substantial number of imported items will be exempted from customs duties in the new budget. In the budget for 2002, more than 3,000 items were exempted from import and customs duties.
Its objective is to reduce the cost of imported industrial inputs and raw materials, as more than 70 percent of all imports comprise this category. Reduced input costs will also help cut export prices of a range of Pakistani goods and improve their competitive position in the global market place.
