A monthly two per cent rise in electricity tariffs has been proposed by the minister to address the imbalance between revenues from and production costs of generating electricity.
Shaikh also said that another draft of the reformed general sales tax (RGST) bill is being drawn up and will be presented to parliament in its next session. He also announced the disbursement of grants worth Rs100,000 each for families affected by floods. There are 160,000 such families, which means that the total expenditure will be Rs160 billion.
A flood tax on the lines of what has been suggested by the World Bank is also inevitable, said the minister. The federation and provinces will remain within their jurisdictions while implementing the tax.
Shaikh also pressured landlords and businessmen to pay their lawful tax dues, warning that if that does not happen, the economy will always have to rely on foreign aid and loans.
Flood tax certain
The minister also added that a flood tax will be implemented for certain. He said that the federal government will stay within its jurisdiction while imposing the flood tax. The procedure for implementing the tax is currently being reviewed. He mentioned that there are ongoing discussions between the provinces and the federation over the imposition of a flood tax at a national or provincial level. An income tax surcharge of ten per cent, as proposed by the World Bank, is being considered by the government.
Landlords, businessmen must pay taxes
Large landlords and businessmen have to pay taxes if the economy is to not continuously depend on foreign aid and loans, according to Minister for Finance Dr Abdul Hafeez Shaikh. The minister also mentioned that the government has frozen its expenditures to the level of last year’s budget. He also said that honest taxpayers should pinpoint those individuals who fail to clear their taxation dues but cautioned against unfairly targeting only government officials and ministers.
2% monthly increase in electricity tariffs likely
The government had two options to address the difference of Rs250 billion between production cost of and revenues from generating electricity. The first one was to increase electricity tariffs, reduce line losses and curb production costs while increasing the efficiency of power companies. The second option was to approach international donors and countries for loans. The minister mentioned that the two per cent increase is separate from the existing fuel charges adjustment mechanism. Tariffs under the fuel charges adjustment mechanism could increase or decrease each month.
The government has drawn up a comprehensive plan to solve the power crisis. The plan consists of dissolving the Pakistan Electric Power Company (Pepco), floating shares of power distribution companies in the country’s stock markets, decreasing line losses, changing distribution companies’ management and switching to gas power plants.
Draft RGST bill almost complete
Shaikh also said that a deal between the federation and provinces concerning the implementation of RGST in the country had been struck and a draft RGST bill is in its final stages. This bill will be presented in the parliament’s next session. He mentioned that the government wanted everyone on board for the implementation of this tax reform and cited that as the reason for the delay in the presentation of the RGST bill to the parliament. The minister estimated that the tax reform will add Rs70 billion to the national exchequer in revenue.
Families affected by floods to get Rs160b cash grants
The minister for finance also announced Rs100,000 each in cash grants for each of the 160,000 families affected by floods and grants for the purchase of seeds and fertilizer for farmers possessing land less than 25 acres. He said that relief efforts in affected areas will last for a year and that funds will be spent together by the United Nations and National Disaster Management Authority. Funds are distributed in the form of cash grants through the Watan cards programme. He said that all donors had expressed satisfaction over the transparency of this form of disbursement.
Published in The Express Tribune, October 30th, 2010.
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