Stock markets, real estate and agriculture to be taxed: Tarin

[LahoreEstate]

Sunday, May 31, 2009
By Mansoor Ahmad

LAHORE: Finance Adviser Shaukat Tarin has said the government will not impose any new taxes on the industry in the next budget and keep general sales tax rate unchanged. However, he said, for increasing revenue the government would bring stock markets, real estate and agriculture under the tax net.

Speaking at a pre-budget seminar here on Saturday, Tarin said there would be a paradigm shift in the coming budget as more importance would be given to the productive sectors which included the industry and agriculture. He said the issue of governance would be effectively addressed and delivery institutions would be strengthened. The federal public sector development programme would be allocated Rs400 billion, he added.

“The economy is passing through testing times. Though debt to GDP ratio has declined appreciably during the past seven years, the debt in actual terms has increased appreciably.” Similarly, he added, tax revenue had more than tripled during the same period but the tax to GDP ratio had declined 3 per cent to 9.7 per cent.

In order to achieve a sustained growth of 8-10 per cent, he said, tax revenue should be in the range of 15 to 17 per cent of GDP, adding growth in the current fiscal year would be around 2.5 per cent.

He said the government was trying to enhance the tax to GDP ratio by bringing new sectors under the tax net, adding the past policy of increasing the tax burden on existing taxpayers had proved counter-productive.

He said the government would facilitate the agriculture sector in all respects and billions of rupees would be allocated for research and development. Special emphasis would be on the dairy sector, he said, adding certain villages throughout the country would be targeted for enhancing productivity by removing all impediments faced by the farmers. Increase in productivity in these villages would serve as a model for other farmers.

Tarin regretted that textiles, the main base of economy, lacked value addition. “Pakistan receives $1 billion from one million cotton bales processed by its industry. India gets $2 billion and China $4 billion by processing the same quantity of cotton.” Next budget, he said, would provide incentives for value addition in textiles.

He said Pakistan could double its textile exports in three years if the industry embarked on a dedicated value addition plan to reach the level achieved by India. The government planned to increase both cotton production and value addition in textile in the next 15 years to attain the level achieved by China and take textile exports to $100 billion, he added.

He said besides textiles there were many other industrial sectors that had great potential. Pharmaceutical was one such sector where Pakistan had quality industries and surplus capacities that could net billions of dollars if the sector was facilitated. Engineering, he added, was another sector with huge export potential that the government would target in the next budget.

The finance adviser regretted that education and health had been given only lip service in the past as these sectors needed adequate resources to increase the skills and productivity of its human resource. He said there would be a substantial increase in the allocations for the two sectors. Education and health programmes would be executed through public-private partnership to ensure better utilisation of funds.

He said the government institutions bleeding the state resources would be fixed and forced to operate efficiently, adding electricity distribution companies had been warned to improve their efficiencies. Railways inefficiency in providing low-cost goods transport service, he added, had increased the cost of doing business.

Tarin said banks had done well, but some larger banks were not fair in distribution of their profits. He said there were issues in disbursement of loans as well. Agriculture, for instance, needed yearly credit of Rs500 billion but got only Rs300 billion from the banking sector. The banks had higher presence in urban centres while rural sectors were deprived.

Former finance minister Dr Salman Shah, former commerce minister Humayun Akhtar, former industries minister Jehangir Tarin, economist Dr Inamul Haq and industrialist Tariq Saigol also spoke on the occasion.


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