Cut defence budget by Rs50b and I’ll withdraw GST increase: Dar

Published: June 18, 2013
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Finance Minister Ishaq Dar. PHOTO: AFP/ FILE

Finance Minister Ishaq Dar. PHOTO: AFP/ FILE

ISLAMABAD: 

Stuffed with tax increases aplenty, the budget has already started drawing flak from politicians for its inflationary impact but faced with opposition, Finance Minister Ishaq Dar is offering a near impossible barter – trading a 1% increase in sales tax with a Rs50 billion cut in military spending. 

The offer, made on Monday during a meeting of the Senate Standing Committee on Finance, came after Senator Haji Adil proposed a 50% reduction in the military’s non-development non-salary budget.

On hearing the proposal, Dar seized the moment by announcing that if the parliament could convince the secretary defence to reduce his budget by Rs50 billion, he would withdraw his 1% increase in the sales tax which is expected to fetch an additional revenue of Rs60 billion.

Defending his pronouncements during a discussion on proposed budgetary measures Dar said “I am convinced that the military has been given due defence budget but still the senators can try to convince the secretary defence”, said Dar.

The military had sought over Rs700 billion but the government only allocated Rs627 billion, he added. However, the finance minister did not talk about the hidden budget that the military receives over and above its stated budget.

The number play

Monday’s meeting also sprang some surprises on the actual impact of tax initiatives taken in the budget. Dar’s revelation that a 1% increase in the sales tax will bring an addition of Rs60billion in the government exchequer surprised many.

The figure presented in Monday’s Senate committee meeting was double the amount announced earlier on the eve of the budget. On June 12 chairman Federal Board of Revenue (FBR) had announced that the government will collect an additional Rs30 billion due to the increase in sales tax rate.

Based on the figure of Rs30 billion, Dar had stated that the government had taken additional tax measure of Rs202.6 billion in the budget. However, the revelation unveiled that the actual additional revenue generated by new tax measure would actually be higher than announced by Rs30 billion.

Raising the spectre of budget manipulation was another disclosure by the finance czar. According to Dar, the 0.5% levy on movable assets will fetch Rs15 billion in additional tax revenue – Rs8.5 billion higher than the figure quoted by chairman FBR, who had claimed earlier that only Rs6.5 billion would be collected from this levy.

Standing his ground

Dar ruled out the possibility of lowering tax rates, arguing that the move would risk reducing next year’s revenue target of Rs2.475 trillion. He added that if the tax target could not be achieved in the coming year, the Rs540 billion allocated in development spending would be adversely affected.

Urging parliamentarians to give only budget-neutral suggestions, the finance minister appealed to the standing committee not to play to the gallery and avoid politics on the budget.

“We cannot play with the economy anymore”, he said when highlighting the need to strengthen the economy and revive the country’s plummeting growth rate.

Sounding a note of guarded optimism, Dar said that the government took a difficult decision when it introduced fiscal adjustments to the tune of 2.5% of gross domestic product (GDP). He briefed the senators that the government projected a budget deficit of 6.3% by end of next fiscal year, showing an improvement of 2.5% or Rs655 billion, over the current year.

Published in The Express Tribune, June 18th, 2013.

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Reader Comments (45)

  • Asad
    Jun 18, 2013 - 9:32AM

    The government and establishment should align themselves to one direction for the betterment of the country.

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  • Tao
    Jun 18, 2013 - 9:37AM

    People of Pakistan, i hope you’ve got the answer of your question as to why defence budget increased this year by 15%.

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  • anwar
    Jun 18, 2013 - 9:40AM

    Cut UR perks and security budget and I’ll eat my hat

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  • Abdul Basit
    Jun 18, 2013 - 9:54AM

    It’s high time to rationalize the priority. Spending a lit bit less money on defence would not hurt the country but increasing GST by 1% would definitely break the backbone of the masses. It’s time to adopt austerity measure whether it be from civil beaucracy or from national defence budget.

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  • frank
    Jun 18, 2013 - 10:00AM

    increase this. decrease that. all sorts of ideas. but never increase taxes on the rich heh mr dar? you are too transparent.

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  • RizwanKhan
    Jun 18, 2013 - 10:16AM

    Dont play word games. Its FM job to handle situations and as usual, Mr Dar has failed yet again.

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  • ezanius
    Jun 18, 2013 - 10:16AM

    Respected Sir, I would like to suggest a very simple solution. Instead of allocating 115 billion for the metro bus services in RWP/ISB and Karachi, reconsider the 1% GST as you merely need half the budget of metro bus service. The metro bus service would benefit few million people at max, whereas 1% GST impacts the whole population.

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  • Anoni
    Jun 18, 2013 - 10:17AM

    Statistics are another word for lies ..stop fooling and get to work . what matter are the outcomes

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  • Baffled
    Jun 18, 2013 - 10:20AM

    Pakistanis have sacrificed a lot for the Army .Now it is time for them to pay back .
    They ought to reduce 50bn from the defence budget and let the poor awam feed their children .The most the army would have to forego is the development of a couple of golf courses .What say you ?

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  • S.R.H. Hashmi
    Jun 18, 2013 - 10:23AM

    Ishaq Dar is sure acting in strange ways. Perhaps he has lost touch with people, even with reality. His idea of not giving government servants any salary increase, and that in a situation of perpetually rising prices was strange, and its impracticability was well-demonstrated when he had to reverse it soon. If he really wanted to save money on this account, he could have given just a nominal increment to the higher paid, but a higher one to the lower-paid.

    And now this idea of trading one percent of GST with Rs 50 billion cut in military spending. At a time like this when military is fighting on many fronts, we need to increase, and not decrease the military budget, which has already been reduced substantially from the requested amount. Surely, the budget for defence should be based on reasonable needs of military and not treated as a balancing item in the budget.

    Karachi

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  • Usman
    Jun 18, 2013 - 10:37AM

    You decrease defence spending at this juncture and Pakistan will be left pitifully vulnerable. Defence is not the only area of budget that can be reduced, although it is the easiest to target.

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  • Baloch
    Jun 18, 2013 - 11:07AM

    Army as a institutions can sacrifice lives of his soldiers for this country but they will never surrender a single Rupee for the poor people of this country …

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  • Muhammad
    Jun 18, 2013 - 11:13AM

    He knows the military will never let that happen so he’s just trying to fool everyone.

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  • H
    Jun 18, 2013 - 11:17AM

    The defense budget should be cut at any costs.

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  • Jun 18, 2013 - 11:29AM

    Dear Sir, the truth is that The defence budget can and should be drastically reduced and double the amount should be allocated to education and health. Much more is needed to be done for land reforms and social reforms.The truth is that there is no external threat to Pakistan. The true threat is from within. The external threat is a phobia built by interested parties to serve their own interests. No one I repeat no one in the world would like to attack Pakistan.The whole world can vouch for this truth but alas people of Pakistan do not see this.

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  • Bilal
    Jun 18, 2013 - 11:29AM

    isn’t it a finance minister job ?

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  • Xnain
    Jun 18, 2013 - 11:33AM

    “According to Dar, the 0.5% levy on movable assets will fetch Rs15 billion in additional tax revenue”
    ET this is an income support levy, not a tax because it will directly replenish Benazir Income Support Program.

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  • Tahir Ali
    Jun 18, 2013 - 11:35AM

    Dar saheb; you have it all wrong. Defence budget should not be decreased but people who earn need to pay taxes irrespective of the source of income

    Increase the capacity of the provinces to collect agriculture tax
    In the 2013-14 budgets of the Province of sind and Punjab the projected agriculture tax collection of the two large provinces are:

    Punjab: Rs 2018 Million
    Sind: Rs 550 Million

    This is shameful to say the least. Tax the agriculturalist,the fruit farm owners.This is the way forward

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  • Xnain
    Jun 18, 2013 - 11:41AM

    @ezanius:
    Why dont the provinces return 15 Billion each back to center. Its much easier and harmless.

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  • Raza
    Jun 18, 2013 - 11:53AM

    In Australia the GST/Sales Tax is 10% putting less burdun on end consumer and their maximum tax rate for high income earners is 47.5%, fetching more tax from rich people and Australia is a developed country. Looking at the arguments of our newly appointed Finance Minster but old in this game seems he does not want to put any burden on rich people, ofcourse we all know the reason why it is not happening. Instead of just reducing the defence budget also put tax on rich people, may be if youhave any intentions to give relief to poor.Recommend

  • ZIA
    Jun 18, 2013 - 11:55AM

    Bring all taxable people/assets to tax net instead of increasing taxes.

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  • Liaqat Ali
    Jun 18, 2013 - 11:59AM

    This comment pretty much presents the mind set of the incumbents. They would prefer to building bus lanes, bridges and motorways over the general well being of the nation

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  • Jun 18, 2013 - 12:03PM

    Let the employee and pension related expenses of the armed forces be excluded from the civilian budget and the real size of the Defense Budget will explode in front of us (ET, 13-06-2013). Nevertheless, it is bold step by the Finance Minister to suggest curtailing the defense budget by PKR 50 billion and thus remove the one percent hike in GST. Salams to Pakistanis.

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  • H. Khan
    Jun 18, 2013 - 12:18PM

    According to CIRP/CPDI report on taxes paid by Senators/MNA you paid Rs 32,750 as taxes.The solution is Senators and MNAs start paying proper taxes on all sources of income
    Please do not cut defence budget,the country is going through both internal and external challenges

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  • Mir Taqi
    Jun 18, 2013 - 12:25PM

    The parliament of the country needs to Convince the Secretary Defense?? What a Joke!!

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  • ;-)chief
    Jun 18, 2013 - 12:28PM

    @ezanius:
    In 118 billion bus project they have LION share…..????

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  • saira yasmeen
    Jun 18, 2013 - 1:22PM

    there are more than 50 thousand batman (servants) working for army officers families
    abolishing this free facility can save much more than 50 billion

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  • Hayat
    Jun 18, 2013 - 1:40PM

    I believe that the meaning of war has changed over the years…..it is no longer about how much money is put into the army…………..In todays world it is all about economic and educational warfare…..all those countries with healthy economies are considered more successful……..We need to stand up on our feet financially to be able to do anything…….

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  • Mazhar
    Jun 18, 2013 - 2:33PM

    Absolute rubbish. PML-N are people without any vision or conviction. There policies are based on gimmicks (metro bus, yellow cabs, laptops) and have historically never taken steps against vested interests and always look for quick fixes (tax policies in existing budget). How can we cut the defence budget when we are fighting a war? Also Pakistan is unfortunately situated in a bad neighborhood. Iran, India, Afghanistan and China on the borders with Persian gulf close by. We need a strong military. The Civil Military imbalance needs to be resolved through institutional mechanisms (strengthen DCC) and a vision on national security and Paksitan’s geoplitical role and not through gimmicks and politically motivated statements.

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  • Nafees N.
    Jun 18, 2013 - 3:01PM

    Mr Dar,
    You are the Government, you decide whether Defence budget can be cut or not!

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  • Rana Amjad
    Jun 18, 2013 - 3:08PM

    Decrease the army budget substantially because we needs funds for education, health, roads, bridges, dams, etc but surely army can reduce their expenses, if they really feel the pain of a common Pakistani.

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  • Sikander Fayyaz Bhadera
    Jun 18, 2013 - 3:16PM

    Who is he asking to cut 50 billion defense budget? He’s the finance minister, shouldn’t he be doing it himself?

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  • Reality check
    Jun 18, 2013 - 4:12PM

    The life style of the generals in this country is the the symbol of british slavery. We need to cut all perks and privileges of these golf playing generals as most of the budget allocated to defense is utilized to maintain the luxurious life styles the generals in this country. I am all for a signifiant cut in the part of the defense budget spent specifically on generals and high rank officers life styles.

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  • Jun 18, 2013 - 4:17PM

    @Mazhar “Pakistan is unfortunately situated in a bad neighborhood. Iran, India, Afghanistan and China on the borders with Persian gulf close by”

    before calling others bad, look yourself before the mirror.You yourself are responsible for your mess not your neighborhood so why blame others.You say as if pakistan is the only country living with difficult neighbors and others are were living with happy neighbor.stop crying and imposing yours own mistake on your neighbors.

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  • salman
    Jun 18, 2013 - 5:04PM

    Dar, please!

    Your leader is the PM, get him to TELL the army that thier budget is being cut.
    You campaigned on the slogan of Shaaaiiiirrrr! Now act like one…

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  • Unbelievable
    Jun 18, 2013 - 6:30PM

    Kudos to Dar – it’s past time that the people of Pakistan understand that they are paying for the military. Yeah it’s a political maneuver and arguably the defense dept budget should be cut regardless of sales taxes but it’s a ploy that is bound to make the military uncomfortable.

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  • Polpot
    Jun 18, 2013 - 7:29PM

    As a Patriot I would say double the sales tax and double the Defense Budget
    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
    What do u say?

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  • Citizen
    Jun 18, 2013 - 10:12PM

    @Polpot:

    I say stop spamming this page with you ill-thought, silly comments. People like you ought to be ashamed of calling yourselves ‘patriots’.

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  • Observer
    Jun 19, 2013 - 4:58AM

    Most Pakistanis support a big army with military hardware, nukes, missiles etc. They also support confrontational geopolitical games that the army plays. What they don’t realize is that, ultimately it is the common man that has to pay for supporting a large military and extra territorial causes. People think it is free and that they pay nothing for this. That is why a peoples’ welfare oriented government should explain to people how much of their income is going for this purpose as Dar alludes to.

    I wonder what the reaction of Pakistanis would be if the government announces a “surtax” to fund extra-territorial military games such as Afghanistan “strategic depth”, Kashmir cause and confrontation with India. I am sure people will then realize these causes directly hit their pocketbooks, and begin to wonder the appropriateness, necessity and logic of these adventures.

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  • Polpot
    Jun 19, 2013 - 7:13AM

    @Citizen: “I say stop spamming this page with you ill-thought, silly comments. People like you ought to be ashamed of calling yourselves ‘patriots’.”
    +++++++++++++++++++++++++++++++++++++++++++++++++++++
    Sir when the Govt increased the Defense Outlay by 15 % you did not label them as ‘ill thought & silly. You also did not accuse them of not being patriot. So why accuse me?

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  • Aschraful Makhlooq
    Jun 19, 2013 - 1:13PM

    Then you shall stand on the borders of Pakistan day and night and shall defend Pakistan’s borders?????

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  • Sahar Khan
    Jun 19, 2013 - 2:24PM

    @Polpot:
    By the way ..who are you? Your recommendations are disaster :D You give us good fun material.

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  • Mohammad Ali
    Jun 19, 2013 - 7:06PM

    I request the finance minister to impose taxes on NLC and Defence Housing Authority who are making lot of money by getting special favour from the government in the name of army. The superior court judgement is on record that NLC is a private organization and not part of army but still very special favour is bestowed on it. Similarly DHA is also earning lot of money by getting land anywhere they like at throwaway price. In the interest of justice, the govt. should inform the public the correct status of these commercial entities and stop giving undue favour to any private entity.

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  • Z I Ahmed
    Jun 19, 2013 - 8:53PM

    There is parallel black economy running that does not pay due taxes to government and there is no tax on agricultural income. Why is the government unable to collect taxes from these areas. Giving money to MNA’s and MPAs for development is a sheer waste that should be curtailed as it is never spent on the welfare of the people.This serves only as a a political bribe. MNAs and MPAs are elected to make legislation and not to do development jobs. Stemming the financial corruption of the bureaucracy is of utmost necessity. These measures alone would recover / save vastly more than the Rs 50 billion the minister wishes to cut from the military irresponsibly. If something needs to be done seriously, that is to put, firstly our financial house in order so that everyone pays taxes according to his income and secondly corruption is eliminated.
    Manage line losses of gas and electricity instead of increasing rates. Is it line losses or corruption?
    There are hundred of ways of improving revenues without increasing tax rates. Our FM is requested to establish the financial writ of the government and financial issues of the government will be resolved.

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  • Proletarian
    Jun 20, 2013 - 9:32AM

    So they will reduce the defence budget only if first the the parliament can convince this secretary defence to reduce his budget. This just shows you who really runs the country.

    In a real democracy the parliment would simply have told the army that their budget was being reduced and would have told them to learn to live within their means.

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