Dar downplays ‘pro-business’ tilt

Says influential segment has been brought under tax net for the first time.

ISLAMABAD:

Amid violent protests by federal employees, the government on Wednesday tried to dispel the impression that the new budget was ‘pro-industrialists’, claiming that influential people have been brought under the tax net for the first time.

In his post-budget press conference on Wednesday, Finance Minister Ishaq Dar tried to dispel the notion that the PML-N government’s second budget favoured industrialists over all other segments of society. He also vowed that no tax measure would be reversed in the coming days, even if faced by pressure from either inside or outside Parliament.

Dar said that after making deep cuts in non-essential expenditures in the outgoing fiscal year, there was no room available for austerity measures. He claimed that 83% of the total budget ‘cannot even be touched’.

He also took exception to cement manufacturers’ decision to increase prices by Rs25 per 50kg bag on the pretext of increase in taxes. “Cement prices will increase by only Rs5 per bag,” he said, warning anyone trying to take advantage by hoarding or profiteering of stern action. The minister added that he will meet cement industry representatives today (Thursday) to sort out the matter.



The government presented its Rs3.936 trillion budget on Tuesday, offering many incentives to industrialists and stock brokers, heightening the ruling party’s pro-business policies.

Dar spent a significant time of his post-budget speech on allaying concerns that the less-privileged will be worst off as a result of the new budget.

Feeling the heat of the budgetary measures, federal employees staged rallies on Wednesday, prompting the Islamabad police to resort to baton-charge and tear gas shelling. The employees have also rejected the 10% increase in their salaries that the government announced as an ad-hoc relief.

A 10% increase both in salaries and pensions will cost Rs42 billion in the next fiscal year and if the government gives 20% increase, it will have to borrow another Rs42 billon which will further compound the budget deficit, said Dar.

He said the government had tried to reach out to the less-privileged and offered them various relief schemes in the first-budget of the PML-N government.

Dar said where the government announced revival packages for industries on one hand, it also announced schemes for youth and the lower middle class. He added that insurance schemes for crops and livestock were introduced in the budget for marginalised farmers.

The government has given a comprehensive package to industries, particularly to the textile sector that is flourishing on official handouts for last two decades. It also lowered the capital gains tax rates for influential stock market brokers. The government lowered corporate income tax rates from 33% to 20% on investments in manufacturing, construction and housing.

The minister said the government withdrew Rs103 billion in tax exemptions in the new budget, which were enjoyed by the affluent people of the country. Out of Rs231 billion tax measures announced in the budget, Rs128 billion were new taxes while the rest were tax exemptions, he added.

Dar said the Rs103 billion to be raised by withdrawing tax exemptions from July should not be treated as new tax measures – a claim contrary to the reality. He added that FBR’s Rs2.810 trillion tax target for the next year will not be revised downwards this time but admitted it was a ‘stretched target’.

Dar insisted that the tax measures would not affect the common man. He said an effort has been made to bring the retail sector into the tax net and big stores will be paying 17% sales tax. He did not admit that this will affect the poor and rich alike as sales tax is paid by consumers, not big retail stores.

Dar said by plugging a loophole, the government imposed 5% income tax on bonus shares, which will generate significant revenues.

Published in The Express Tribune, June 5^th, 2014.