Power tariff due to be increased by 17%, new NFC award in 2010-11

[Naveed Yaseen]

New NFC award to be announced in 2010-11

* Finance secretary hints at imposing taxes on real estate, services sectors
* Says required power tariff increase estimated at 17%

By Sajid Chaudhry

ISLAMABAD: Finance Secretary Salman Siddique said on Tuesday a new National Finance Commission (NFC) award would be finalised by the first half of the 2010-11 fiscal year – between July and December in 2010.

Siddique told the National Assembly (NA) Standing Committee on Finance and Revenue that to facilitate all four provinces in reaching an agreement, the new NFC Award would be based on the mechanisms of divisible pool and subvention. Revenue distribution by subvention would be carried out on the basis of population, backwardness, fiscal efforts and development needs of the provinces, he added.

He told the committee that the budget for the 2009-10 fiscal year would, however, be prepared under an interim NFC award – in force for the past few years.

The NA body was briefed on the tax collection situation in the ongoing fiscal year as well as issues faced by the economy due to the global credit crunch.

New tax: Siddique hinted at imposing a capital gains tax on the real estate sector and a 4.5 percent tax on services in the forthcoming 2009-10 budget, under an agreement with the provincial governments. The tax collection target for the next fiscal year is being fixed at Rs 1.405 trillion, he said.

The finance secretary said these revenue measures are being considered to broaden the tax base.

A revenue potential of Rs 300 billion exists in taxing services and the federal government has already begun negotiating a process with the provincial governments, Siddique said. He said the services sector – which accounts for 53 percent of the gross domestic product and is contributing negligibly in terms of taxes – would be taxed under an agreement with the provinces, with enforcement and collection responsibilities to be transferred to provincial authorities when they are able to manage it in the next 5 to 7 years.

Power tariff: The finance secretary told the committee that the current required power tariff increase, to be passed on to customers, had been estimated at 17 percent.

The finance secretary said all commercial concerns of the military were being taxed under the normal regime, adding that establishments managing production exclusively for the armed forces were, however, exempt from taxes.

http://www.dailytimes.com.pk/default.asp...2009_pg7_7