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Govt may set Rs1,711bn revenue target next year [The News] 09 Feb, 2010
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| |  | | Govt may set Rs1,711bn revenue target next year | | | | Tuesday, February 09, 2010
By By Aftab Maken
| ISLAMABAD: The government is planning to take fresh steps in the federal budget for 2010-11 in an attempt to enhance tax collection target to Rs1,711 billion. In this connection, the government will impose value added tax, phase out exemptions and tax the services sector, reveals the finance ministrys Budget Strategy Paper.
The government, in its three-year revenue policy, envisages tax collection of Rs2,071 billion in financial year 2011-12 and Rs2,476 billion in 2012-13. If the targets are achieved, they will enhance tax-to-GDP ratio to 12 per cent compared to current 9.3 per cent, the paper says.
The Budget Strategy Paper cites a number of reasons for the narrow tax base, currently below 10 per cent, which include widespread exemptions and low contribution of major sectors as compared to their contribution to the gross domestic product (GDP).
In current financial year 2009-10, the finance ministry earlier expected revenue collection of Rs1,380 billion, which it later revised to Rs1,396 billion with increase in excise duty on services like banking, insurance and others, increase in withholding tax on imports, increase in excise duty on cigarettes and imposition of capital value tax on real estate.
With the introduction of broad-based value added tax (VAT) from July 1 this year, which will replace general sales tax, extra revenues will be generated through systematic documentation of economy.
Other step planned to be taken next year is phasing out of exemptions which will broaden the tax base and ensure horizontal equity in tax system. Besides, tax will be imposed on the services sector and tax administration reforms will be completed which will improve efficiency, integrity, transparency and prevent revenue leakages, the strategy paper says.
The reform programme includes specific measures to strengthen enforcement and audit functions, automation of tax collection, monitoring and reporting systems, re-engineering of existing processes, simplification of rules and procedures, and capacity building.
In the paper, the finance ministry anticipates consumption of petroleum products will gradually increase, resulting in increased revenue of Rs135 billion to Rs145 billion by 2012-13 because of petroleum levy and gas surcharge.
Non-tax receipts of the federal government comprising income from property and enterprises (including profits, interest receipts), receipts from civil administration, State Bank profits and miscellaneous receipts eg royalties, passport fee, receipts of federal ministries, divisions and departments, etc are expected to rise from Rs495 billion to Rs550 billion by 2012-13, the paper says.
Dividend receipts are expected to increase in the wake of the decision to restructure eight public-sector enterprises over the medium term. This will help reduce losses and increase return on investment.
The Friends of Democratic Pakistan, in the donor conference held in Tokyo in April 2009, helped in mobilising pledges worth $5.7 billion. Approximately $1 billion, mostly in shape of project loans, is expected to be disbursed in 2009-10, the paper says.
As per the National Finance Commission Award announced in December 2009, share of provinces from the divisible pool will be enhanced and a larger share of the federal tax revenue will be transferred to the provinces, starting from 56 per cent in 2010-11 to 57.5 per cent in 2011-12 which will continue by the end of five-year period, it concludes.
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