Budget to envisage Rs105bn fresh taxes

[Lahore_Real_Estate]

ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh will present his second and PPP-led coalition government’s fourth national budget in the National Assembly on Friday, with fresh taxation measures of about Rs105 billion, a reduction of Rs60 billion in subsidies and a consolidated deficit of Rs840 billion or four per cent of GDP.

According to a senior government official, tax revenue target has been proposed at Rs1.952 trillion for the fiscal year 2011-12, with a major additional contribution of about Rs90 coming from expansion in general sales tax and introduction of a minimum asset alternative tax to net in wealth and assets of people who are currently outside the taxation system without
burdening the existing taxpayers.

The official told Dawn that the federal cabinet would be suggested to bring a number of new food related items under GST and reduce its overall rate to 16 per cent from 17 per cent.

About 16 per cent growth in revenue over the current year’s revised target of Rs1.588 trillion mainly because of increase in the size of GDP and inflation will contribute about Rs256 billion. Another Rs36 billion is expected to be raised through administrative measures.

The official said that except for unpacked food items, education, health and agriculture produce, almost every segment of economy would be brought under the consumption tax, widely known as GST, but it would not be called reformed general sales tax for being too controversial. Equipment and machinery relating to the CNG sector, fertilisers, pesticides, computers and other professional materials would come under 17 per cent GST.

The federal expenditure for the next year is estimated at about Rs2.8 trillion.

According to another official, the size of consolidated (federal and provincial) budget has been estimated at about Rs3.8 trillion. The total revenue has been estimated at about Rs2.75 trillion and provincial transfers at Rs1.224 trillion.

Budgetary allocations indicate that current expenditures of most federal ministries will be frozen at the current year’s level because of tight fiscal position.

The government has set a tax revenue target of Rs2.1 trillion, 23 per cent above the current year’s revised target of Rs1.71 trillion. This includes a revenue target of Rs1.952 trillion for the Federal Board of Revenue against the current year’s revised estimate of Rs1.588 trillion. The non-tax revenue is estimated at Rs687 billion, up 30 per cent from this year’s revised
estimate of Rs526 billion.

The size of Public Sector Development Programme has been set at Rs280 billion against the current year’s original estimate of Rs270 billion which was brought down to Rs180 billion. Another Rs35 billion will be spent on flood relief assistance, slightly less than current year’s Rs40 billion.

Pensions will require Rs118 billion against this year’s Rs107 billion. Likewise, federal government’s service delivery cost has been estimated at Rs200 billion, which is about Rs20 billion more than current year’s revised estimate of Rs180 billion, brought down from Rs221 billion.

SECURITY, INTEREST: An amount of Rs495 billion has been earmarked for defence, about 12 per cent more than current year’s allocation of Rs442 billion. Another Rs340 billion will be made available through grants for security expenditure, up 19.3 per cent from current year’s Rs285 billion. Total security-related expenditures will increase by 15 per cent to Rs835 billion against this year’s Rs727 billion.

An almost equally large amount of Rs786 billion will go to debt servicing, about Rs60 billion or 8.3 per cent more than current year’s revised estimate of Rs726 billion. The government had earmarked Rs699 billion in the 2010-11 budget for debt servicing which was revised to Rs726 billion.

The provinces are estimated to get Rs1.224 trillion as share out of the federal divisible pool, up 23 per cent from the current year’s revised estimate of Rs993 billion.

The provincial governments are expected to generate a tax revenue of Rs78 billion next year, slightly higher than current year’s revised estimate of Rs67 billion. Provincial non-tax revenue is expected at Rs69 billion against this year’s revised estimate of Rs66 billion.