Taxation relief will cost Rs 7.5b, says Aziz

Staff Report

ISLAMABAD: Finance Minister Shaukat Aziz said on Sunday that taxation relief measures introduced in the federal budget 2004-05 would have a net negative impact of Rs 7.5 billion on revenue collection.

Addressing a post-budget press conference, he said the loss would be covered by enhancing the tax base and increasing GDP growth.

“The target of Rs 580 billion set for next fiscal year would largely depend on growth, inflation and reforms in the tax administration,” he said.

Mr Aziz said the government was confident that after abolishing three slabs of GST and introducing a uniform slab of 15 percent, more people would be brought into the tax net.

“This will benefit small traders and the SME sector the most,” he said.

He said the limit of turnover for GST registration has been raised from Rs 0.5 million to Rs 5 million, with an agreement of 0.75 percent fixed income tax to promote small businesses.

Investment climate will improve: Mr Aziz said measures taken in the federal budget 2004-05 would improve the investment climate, accelerate growth, boost agriculture, create employment opportunities, reduce poverty, improve social indicators and strengthen the country’s physical infrastructure.

“The budget has introduced considerable reduction in the cost of doing business by reducing industrial and commercial power tariffs and reducing import duties on raw materials and capital goods, which will benefit large scale manufacturing, the SME sector and small traders,” Mr Aziz said.

He said attention has been given to the poor, particularly in the rural areas of the country, and problems being faced by senior citizens. He added that the government had tried to resolve their problems by increasing pensions and abolishing the 10 percent withholding tax on Behbud Certificates.

“The national savings department of the government, which has around 300 branches in the country, is being converted into the Pakistan Savings Corporation owned 100 percent by the government but with a new corporate look,” Mr Aziz said.

He said new products would be introduced such as mutual funds comprising Pakistan Investment Bonds and WAPDA Bonds and other products would also be distributed through this corporation.

Agriculture productivity: The minister said that in order to enhance agricultural productivity, some 300 bulldozers are being imported to level fields for efficient use of water resources and higher per acre yields. “This will also help increase farmers’ income,” he said.

Mr Aziz said the focus was also on raising non-agriculture income of people living in rural areas, and lending would be enhanced in rural areas for the purpose through micro-finance on the model of Thailand.

“The government plans to promote cottage industry both in urban and rural areas, which would help promote self-employment, particularly in rural areas.”

At the same time, he said the government wanted to initiate an urban renewal programme to cater to the growing needs of big cities arising out of rural urban migration, and initially the programme would be started in Karachi and Lahore, then in other cities in the second phase.

On the issue of collecting TV license fees through electricity bills, Mr Aziz said people who did not own a TV set could go to a WAPDA office and get a waiver.

On the imposition of a 5 percent duty on computers and computer accessories, the minister said the measure was necessary since the zero-rated duty facility was being misused.

Defence expenditure: To a question about the defence budget allocation for the next fiscal year, Mr Aziz said the allocation was only seven percent higher than the revised estimates for the outgoing fiscal year.

“Defence expenditure is only 3.9 percent of the GDP compared to actual spending of 4.1 percent of the GDP in the outgoing fiscal.”

He said if the need arose the government would not hesitate to allocate more resources for defence purposes, since the government believed in strong defence and economic sovereignty of the country.

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