Budget 2012: ‘Govt will focus on fiscal self-reliance’

Businessmen agree that some tax exemptions should be removed.

ISLAMABAD:

The budget for fiscal year 2012 is going to focus on building the nation’s capacity for self-reliance, said Finance Minister Abdul Hafeez Sheikh, at a seminar in Islamabad organised jointly by the Express Media Group (of which The Express Tribune is a subsidiary) and the University of Lahore.

The finance minister, in his usual measured tone, refrained from giving away specifics but seemed to indicate that the government was gearing up to remove exemptions on several sectors in order to bring them into the tax net. He also made no mention of subsidies, fuelling speculation already circulating the capital that the government will drastically reduce the amount it spends on providing untargeted subsidies.

Sheikh insisted that the government had taken several tough decisions. He pointed to the fact that the PPP-led administration had beaten back the power securities brokerage lobby and levied a capital gains tax for the first time in over two decades. He also cited many of the industries that had seen their tax exempt status removed, such as the textile, leather and carpets sectors.

The minister was accompanied on the seminar panel by economists, businessmen, and lawmakers. There was unanimous consent among all participants that the tax net needs to be widened and exemptions need to be removed, but then every businessman made it a point to ask the government to grant, retain, or reintroduce an exemption that benefited their industry.

Imtaiz Haider, managing director of the Islamabad Stock Exchange, for example, asked the government to add exemptions to the capital gains and to review its implementation structure. Ali Raza, the chairman of the Rawalpindi Chamber of Commerce and Industry, criticised the government’s decision to remove the tax exemption on poultry feed since it affects the poultry industry, which has thus far been booming in northern and central Punjab.

The exception was Jahangir Tareen, former federal industries minister and an entrepreneur whose holdings primarily include agriculture and agro-industry. Tareen pointed out that the rhetoric calling for an agricultural income tax was misinformed, since all four provinces levied such a tax in 2002.

The problem, Tareen pointed out, was not the legislation but the implementation. He cited his own example, saying that when his company tried to pay the agricultural income tax, they were turned away by the local tax officials and were only able to file their returns after seeking intervention from the senior-most levels of the Federal Board of Revenues.

There was, in other words, complete agreement on what needs to be done in order to move the country towards fiscal balance, but few seemed willing to take the first step, a fact bemoaned by the minister himself.





Published in The Express Tribune, May 29^th, 2011.