Dar announces broad contours of mini-budget, scheme to lure traders
Says fixed income tax rate proposal to be put forward, rejects talks to let rupee devalue
Finance Minister Ishaq Dar. PHOTO: INP/FILE
ISLAMABAD:
Federal Minister for Finance Ishaq Dar unveiled the broad contours of two of his major policy initiatives on Thursday - a mini budget to be introduced in the next couple of days and a fixed income tax scheme for estranged traders in a bid to bring them into the tax net.
While speaking in a meeting of the National Assembly Standing Committee on Finance, Dar also rejected the suggestions that rupee be devalued by 10% against the greenback. “The idea that the Pakistani rupee against the US dollar was overvalued by at least 10% is an imported one and pushed by someone else,” he said, while taking a jibe at the IMF without explicitly naming it.
“I have told them in front of the Prime Minister that the market forces determine the value of the currency and we cannot intervene to devalue it on their desire”, he added.
“The rupee is actually undervalued by at least 8%,” said Dar, while terming the current rupee-dollar parity of Rs105.5 to a dollar ‘manipulated by a handful of speculators.’
Dar also used the forum to prepare ground for the upcoming mini-budget to raise roughly Rs40 billion extra taxes over the IMF demand. The government has to announce the additional measures before November 30.
He tried to link anticipated increase in hundreds of regulatory duties on imported items to improve the country’s external finances position. “Despite overall reduction in imports, the imports of luxury goods have significantly increased and the government is seriously considering managing this trend,” said Dar, adding that one obvious option was to increase duties.
The government is likely to increase duties currently covered under Statutory Regulatory Order (SRO) 568 besides taking other measures.
Dar said due to reduction in commodity prices, the government was expecting $3 billion to $4 billion decrease in the import bill but that is not materialising due to increase in imports of luxury goods. He termed imported cheese and butter as ‘luxury goods’.
Estranged traders
Dar also hinted at announcing a special scheme for traders to bring them into the tax net, as the business community is not ready to come into the tax net despite the government’s imposition of 0.3% withholding tax (WHT) on banking transactions.
“I am prepared to have a separate block of new assesses (income tax return filers) who will be offered to come into the tax net by paying a nominal fixed income tax, may be up to Rs25,000,” said Dar. He said the fixed tax rate will depend upon the size and location of the shop.
He said the fixed tax will be still less than the amount traders are currently paying in bribes to the lower staff of the Federal Board of Revenue (FBR) and to the lawyers to keep the tax authorities away.
He said in case no agreement is reached with the traders, the government might further extend the date for filing income tax returns, which is currently set at November 30. But, he added, if the traders accepted his offer, at least 5 million new people could come in the tax net against the current level of less than 1 million total income tax filers.
“A group of traders wants to whiten hidden assets by exploiting the opportunity but they should know that it is not a tax amnesty scheme,” he said. “During negotiations the traders admitted that they had parallel-undisclosed bank accounts in the names of their drivers and cooks.”
He said if the traders agree to his proposal, the government might bring a Bill in the Parliament to give legal cover to the scheme.
Published in The Express Tribune, November 27th, 2015.
Federal Minister for Finance Ishaq Dar unveiled the broad contours of two of his major policy initiatives on Thursday - a mini budget to be introduced in the next couple of days and a fixed income tax scheme for estranged traders in a bid to bring them into the tax net.
While speaking in a meeting of the National Assembly Standing Committee on Finance, Dar also rejected the suggestions that rupee be devalued by 10% against the greenback. “The idea that the Pakistani rupee against the US dollar was overvalued by at least 10% is an imported one and pushed by someone else,” he said, while taking a jibe at the IMF without explicitly naming it.
“I have told them in front of the Prime Minister that the market forces determine the value of the currency and we cannot intervene to devalue it on their desire”, he added.
“The rupee is actually undervalued by at least 8%,” said Dar, while terming the current rupee-dollar parity of Rs105.5 to a dollar ‘manipulated by a handful of speculators.’
Dar also used the forum to prepare ground for the upcoming mini-budget to raise roughly Rs40 billion extra taxes over the IMF demand. The government has to announce the additional measures before November 30.
He tried to link anticipated increase in hundreds of regulatory duties on imported items to improve the country’s external finances position. “Despite overall reduction in imports, the imports of luxury goods have significantly increased and the government is seriously considering managing this trend,” said Dar, adding that one obvious option was to increase duties.
The government is likely to increase duties currently covered under Statutory Regulatory Order (SRO) 568 besides taking other measures.
Dar said due to reduction in commodity prices, the government was expecting $3 billion to $4 billion decrease in the import bill but that is not materialising due to increase in imports of luxury goods. He termed imported cheese and butter as ‘luxury goods’.
Estranged traders
Dar also hinted at announcing a special scheme for traders to bring them into the tax net, as the business community is not ready to come into the tax net despite the government’s imposition of 0.3% withholding tax (WHT) on banking transactions.
“I am prepared to have a separate block of new assesses (income tax return filers) who will be offered to come into the tax net by paying a nominal fixed income tax, may be up to Rs25,000,” said Dar. He said the fixed tax rate will depend upon the size and location of the shop.
He said the fixed tax will be still less than the amount traders are currently paying in bribes to the lower staff of the Federal Board of Revenue (FBR) and to the lawyers to keep the tax authorities away.
He said in case no agreement is reached with the traders, the government might further extend the date for filing income tax returns, which is currently set at November 30. But, he added, if the traders accepted his offer, at least 5 million new people could come in the tax net against the current level of less than 1 million total income tax filers.
“A group of traders wants to whiten hidden assets by exploiting the opportunity but they should know that it is not a tax amnesty scheme,” he said. “During negotiations the traders admitted that they had parallel-undisclosed bank accounts in the names of their drivers and cooks.”
He said if the traders agree to his proposal, the government might bring a Bill in the Parliament to give legal cover to the scheme.
The Finance Minister also shared plan to settle the outstanding tax refunds of roughly Rs200 billion. “All the refunds cannot be cleared in one-go as these will carry implications on the net revenue collection and shares of provinces will also be suppressed.”
Published in The Express Tribune, November 27th, 2015.