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.

Legislators, stakeholders decide to revive defunct Pakistan Steel Mills

Updated 21 October 2019

Legislators, stakeholders decide to revive defunct Pakistan Steel Mills

  • Senate body decides to clear Rs14-15 billion of workers’ dues in 18 months, Senator Aurangzeb Khan tells Arab News
  • The mill’s closure has cost the country Rs50 billion during the last 14 months: Stakeholders

KARACHI: Pakistan’s legislators and stakeholders on Monday decided to revive the country’s largest lossmaking public sector megacorporation, the Pakistan Steel Mills, and clear about Rs15 billion belonging to its workers, a senator and stakeholders confirmed to Arab News on Monday.

A meeting of Senate’s Standing Committee on Industries and Production was held to review the revival plan of the Pakistan Steel Mills which has remained non-functional since June 2015 after witnessing a decline in its production since 2008.

“The steel mill will be revived and for that, we have scheduled an advisory meeting in the next 15 days that will determine our future course of action. Today’s meeting was attended by professionals and they have informed us that the mill is 100 percent in working condition. They also maintained that some vested interest groups do not want to run the steel mills,” said Senator Aurangzeb Khan, member of the standing committee.

“When and how to restart the steel mills will be decided in the next meeting,” he assured.

The Pakistan Steel Mills was constructed in 1973 under an agreement signed between the country’s administration and the erstwhile Union of Soviet Socialist Republic (USSR) in 1971. The Soviets also agreed to provide technical and financial assistance for the construction work.

The senator said that the accumulated dues of workers and stakeholders had increased to around Rs15 billion since the closure of the mill.

“The steel mill is closed and the workers’ dues have accumulated to Rs14-15 billion. Today we have decided that the dues will be paid in 18-month installments of Rs5 billion which will be released in six months each,” Khan said.

Pakistan is also seeking Chinese and Russian help to revive the steel mills, though the stakeholders informed the senate body they could revive it on their own with local expertise.

“We don’t need any Chinese or Russian experts; we can run the mill with local expertise. Machinery and specialists, if needed, will be allowed to hire,” Mumrez Khan, the convener of the PSM Stakeholders’ Group, comprising employees, pensioners, suppliers, dealers, and contractors, told Arab News.

The incumbent government of Prime Minister Imran Khan is looking at various options to revive the steel mills that include induction of professional management, but no final decision has so far been made in this connection.

“The daily losses are estimated to be around Rs120 million due to the closure of plants,” Mumrez Khan claimed, adding that during the last 14 months of the current administration the closure of the mill has cost the country Rs50 billion.

The stakeholders made the revival of the mill contingent on the reconstitution of the board of directors by inducting relevant experts and professional management.

They also insisted on initiating the accountability process against people responsible for its closure, asking the government to refer their cases to the National Accountability Bureau (NAB) and instruct the Federal Investigation Agency (FIA) to recover the mill’s dues.

“The steel import tariff must be rationalized to provide level playing field to all the competitors in the country,” Khan added, claiming that “the revival of the steel mills will add Rs100 billion revenue.”

“I have informed the legislators that the accumulated losses of the steel mills have jumped to about $11 billion due to the closure of plants and imports of steel products,” he said.

Pakistan is also mulling to privatize this lossmaking public entity but no decision has so far been taken. However, it was decided that the defunct entity would be revived before taking any final decision regarding its privatization.

Spread over an area of 18,600 acres with 10,390 acres for the main plant, the Pakistan Steel Mills is located 40 kilometers from Karachi in the Port Qasim vicinity. The PSM had a production capacity of 1.1 million tons of steel which was expandable to 3 million tons per annum. The main PSM products included coke, pig iron, billets, cold-rolled sheets, hot-rolled sheets, and galvanized sheets.