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.
