Finance advisor says the rich, businesses to be taxed to meet Pakistan’s revenue targets

US Special Representative for Afghanistan & Pakistan Richard Holbrooke (L), co-chairs a session with Pakistan's Finance Minister Abdul Hafeez Shaikh during the Pakistan Development Forum in Islamabad November 14, 2010. (Reuters)
Updated 13 June 2019

Finance advisor says the rich, businesses to be taxed to meet Pakistan’s revenue targets

  • Rs.8.2 trillion budget released on Tuesday for the fiscal year to June 2020
  • Pakistani stocks rose on Wednesday, business community gave mixed reviews of PM Khan’s first budget

ISLAMABAD: De facto Pakistani finance minister Hafeez Shaikh said on Wednesday the government would collect more taxes from the rich as well as businesses to meet the ambitious tax collection target of Rs5.5 trillion ($36 billion) set in the annual budget.

The Rs.8.2 trillion budget released on Tuesday for the fiscal year to June 2020 underlined the scale of the economic challenges faced by the government of Pakistan, including pushing ahead with reforms and measures to curb ballooning current and fiscal account deficits.

Successive governments have promised to rein in tax evaders and boost revenues but face fierce resistance to change, including from the many politicians and businessmen believed to be among those dodging their taxes. Only 1.8 million people file income tax returns in the fast-growing South Asian nation with a population of 208 million and a large informal economy.

“If we want to stand tall in the comity of nations, we will have to collect our taxes,” Shaikh told reporters at a post-budget press briefing in Islamabad. “And for that, if we have to offend some people, we are ready to do it.”

Listing the major sectors from which the government expected to collect more revenue, he said businesses would be taxed on products sold in the domestic market but continue to avail the zero-rated tax facility on exports.

Shaikh said the government also planned to collect sales tax from the industrial sector on different goods at the manufacturing stage to put an end to tax evasion.

“The government is also abolishing the distinction between tax filers and non-tax filers,” he said, adding that if a person failed to become a tax filer while purchasing property or a car, he would receive a tax liability after a 45-day limit lapsed.

“All these measures will have a far-reaching impact and help increase the tax base,” he said, adding that a sectorial analysis was also being carried out to collect more taxes from the businesses. “This is an ambitious revenue target, but we are hopeful to achieve it with our collective efforts.”

Pakistani stocks rose on Wednesday and the business community gave mixed reviews of Prime Minister Imran Khan’s first budget aimed at securing a $6 billion bailout from the International Monetary Fund (IMF).

The government had been forecasting growth of 4% for the next financial year, but after Revenue Minister Hammad Azhar delivered his budget speech, the government released a budget document showing it trimmed its growth estimate for the coming year to 2.4%.

The government has already slashed its year to June 2019 growth forecast to 3.3% from the 6.2% predicted at the time of the last budget. The IMF’s estimates growth of around 2.9%.

Inflation, which hit 9% in May, is seen at 11-13% during fiscal year 2019/2020.

Talking about the priorities of the Khan-led government in the coming fiscal year, Shaikh said it had allocated Rs407 billion for social safety programmes and given subsidies to the poor on utility bills. The government had increased the annual development budget from Rs550 billion to Rs950 billion to create jobs and build infrastructure like road networks and dams, he said.

Shaikh also announced that the government had allocated Rs152 billion for the development of the tribal districts and to incentivize the private sector.

“Despite fiscal constraints, we are committed to protect our poor and try to eliminate the difference between rich and poor through our just economic policies,” he added.

Pakistani PM names army chief to new national development council

Updated 18 June 2019

Pakistani PM names army chief to new national development council

  • New body will formulate policies, approve long-term planning, provide guidelines for regional cooperation
  • The formal inclusion of the army chief in a development policy-making body is an unprecedented move

ISLAMABAD: Pakistani Prime Minister Imran Khan has approved the establishment of a new high-powered government body, the National Development Council (NDC), of which the country’s all-powerful army chief will be a member, a federal government notification issued on Tuesday said.
The memo said Khan would chair the eleven-member council comprising federal ministers, provincial chief ministers and federal secretaries. Army chief General Qamar Javed Bajwa’s formal inclusion in the body is unprecedented even by Pakistani standards, a country in which the military has ruled for almost half its history.
The council includes the Federal Minister for Foreign Affairs, Federal Minister for Finance/Adviser to the Prime Minister on Finance, Federal Minister for Planning, Development & Reform, Federal Minister for Commerce/Adviser to the Prime Minister on Commerce, Industries & Production and Investment, Secretary to the Prime Minister, Secretary Foreign Affairs Division, Secretary, Finance Division, Secretary, Planning, Development & Reforms Division and the four provincial chief ministers.
The Azad Jammu and Kashmir Prime Minister, and the chief minister of Gilgit-Baltistan will be also be members of the body on invitation. The additional secretary of the Prime Minister’s Office will be the secretary of the council.
Defining the terms of reference (ToRs) of the council, the notification said it would set “policies and strategies for development, formulate and trailer policies to achieve accelerate economic growth, approve long term planning for national and regional connectivity and provide guidelines for regional cooperation.”