HomeBusinessSingle-digit taxation not sustainable: Finance Minister

Single-digit taxation not sustainable: Finance Minister

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ISLAMABAD, Jun 13 (APP):Reiterating the pressing need for digitization and broadening of tax base, Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb asserted here on Thursday that below 10 percent tax to GDP ratio was not sustainable for managing country’s economy.

“We have to take it up to 13 percent in next three years gradually,” the minister said while addressing the post-budget press conference, adding as per the international bench marks, no country could sustain at 9.5 tax to GDP ratio base without external assistance. Hence, there is dire need to enhance tax to GDP ratio, the minister said.

The minister was flanked by State Minister for Finance, Ali Pervaiz Malik, Secretary Finance, Imdad Ullah Bosal and Chairman Federal Board of Revenue (FBR), Amjad Zubair Tiwana.

Aurangzeb underscored the importance of doing away with undocumented economy with end-to-end digitization to reduce human intervention as much as possible and make the tax mechanism transparent and mitigate chances of corruption. The minister admitted that the Federal Board of Revenue (FBR) could not do compliance and enforcement to the extent it should have done.

He said, the government had introduced progressive taxes in the federal budget for upcoming fiscal year 2024-25 to impose more tax on high income earners.

He said, the country needed to move on the direction of broadening tax base to make economy sustainable. Therefore, it was imperative to bring into tax net the retailers and wholesalers to share the burden.

He said, the government had launched tax scheme for retailers and wholesalers and they were offered to registration on volunteer basis, however it was termed unsuccessful. Later, in May 2024, the minister added, FBR workforce mobilized itself, which resulted in registration of around 31,000 retailers with the scheme till date.

He said, the registration for the scheme would continue while tax would also be imposed from July 2024. “We have no other option but to get this sector into tax net,” he remarked. The minister said that Point of Sale (PoS) prize scheme would be re-launched to do away with cash transactions.

To a question about Petroleum Development Levy (PDL), the minister said it would be increased gradually and in accordance with international oil prices.

The minister said that the exemption and 35% category of salary slabs were intact, adding that there was change in other slabs falling between. He said, the government took up tax for non-salaried personals upto 45 percent.

Talking about youth development, the minister said Pakistan was having third largest freelancer population in the world. Hence, keeping in view this reality, the government had provided record allocations for Information and Technology sector to improve digital infrastructure and provide the youth an enabling environment.

He said, the country’s IT exports stand at $ 3.5 billion which could be lifted upto $7 billion provided an enabling environment is given to youth.

He admitted that proper financing was not provided to SMEs because banks have no appetite for them and assured that banks would now come with specific schemes, in three sectors including agriculture, IT and SMEs.

Talking about PSDP priorities, the minister said that government had focused on completing ongoing projects therefore 81 percent allocations were made for these schemes while only 19 percent was allocated for new schemes, which included important projects and those have foreign funding.

Finance Minister Senator Muhammad Aurangzeb said that the government was determined to plug the tax leakages and has initiated end-to-end digitization of the revenue collection system to minimize human intervention; end harassment and improve tax compliance culture in the country.

He said measures were being also taken to block the loopholes in Sales Tax system with a complete digitization adding sufficient data was available, indicating potential tax evaders. However, he added, the data would be thoroughly verified by a data analyst team.

He said that the verified data would be provided to the field formation for execution and bring tax evaders into the tax net. He said negotiations with the provincial government were also in progress to enhance revenue collection and rationalization of expenditures.

Elaborating rationalizing measures, the minister said in the first phase, devolved ministries would be closed as some, such as PWD had already been closed. He said measures were afoot to shut down other ministries/departments during a couple of months.

Regarding the privatization programme of the current government, the minister categorically cleared that all the stakeholders were on-board and the government was taking the process forward in consultation with the allied political parties to complete it within the stipulated time-frame.

He said that the privatization of loss-making entities was essential for the economic recovery and social development of the country, adding the privatization of Pakistan International Airlines would be completed by 15 August and after its divestment, under the direction of Prime Minister, work on the outsourcing of Islamabad Airport would be initiated.

Soon after that other airports including Lahore and Karachi would also be outsourced, he said adding the government was also keen to introduce corporate governance in the power distribution companies (Discos) to enhance their efficiency by deputing the their chairmen from the private sector experts.

To a question, the minister said that the talks with the International Monetary Fund (IMF) were held in a cordial manner and were progressing towards a positive direction to reach a conclusion by next month.

Speaking on the occasion, Minister of the State for Finance and Power, Ali Pervaiz Malik said that the government was aware of the hardships faced by the common man in the country and it was working on broad-based reforms agenda to enhance efficiencies of public sector organizations to create fiscal space for them.

He said that despite fiscal constraints, the government had enhanced the budgetary allocation of the Benazir Income Support Programme and subsidy for the power sector for the safety of protected consumers, adding that minimum wage was increased.

Chairman Federal Board of Revenue clarified that there was no increase in the tax on DAP fertilizer, adding that tax on imported tractors were enhanced by 10 percent as the locally manufactured tractors were levied about 18 percent tax and the imposition of tax on the imported tractors were aimed at making the product competitive in local market.

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