Govt deficit plan aims to cut entitlements

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Deficit
Budget cut proposed. PHOTO: REUTERS
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ISLAMABAD:  The government has postponed the National Assembly session that it had convened to present mini-budget till next week, amid plans to withdraw tax free privileges being availed by the president, governors and federal ministers.

“The decision to present the revised Finance Bill in the National Assembly on Friday has been deferred due to the funeral of Begum Kulsum Nawaz,” Finance Minister Asad Umar told The Express Tribune on Wednesday.

He said the money bill will now be tabled on coming Tuesday, (September 18).

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This would also provide an opportunity to the government to further fine tune its budgetary proposals, particularly, the Public Sector Development Programme.

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The PTI government has planned to present a revised budget for FY2018-19 in the National Assembly to make it align with macroeconomic realities.

The government is set to cut the federal Public Sector Development Programme (PSDP), adjust current expenditures and propose new taxation measures to contain budget deficit.

The last government led by the Pakistan Muslim League-Nawaz had presented a budget that projected a budget deficit of 4.9% of Gross Domestic Product or Rs1.88 trillion. But the PTI government’s assessment showed that the deficit could touch the Rs2.4 trillion mark if corrective measures are not taken.

Revenue collection is also affected due to smuggling, under-invoicing and mis-declaration of goods at the import stage.

At present, the Inland Revenue Services do not have mandate to conduct audit of taxes collected at the import stage since the imports are handled by the customs department.

About 45% of total taxes is collected at the import stage, which the authorities concerned believe can increase, if under-invoicing is tackled effectively.

The government may propose to withdraw tax benefits to recoup Rs75 billion revenue losses. The last PML-N government had extended tax benefits to individuals, just weeks before the general elections.

The increase in regulatory and custom duties were also among the proposals to achieve about 20% increase in the revenue collection in the first year of the PTI government.

“In line with its policy to crackdown against a lavish lifestyle of government functionaries being enjoyed at the taxpayers’ expense, the finance ministry may withdraw perquisites being availed by heads of the state, provinces and federal ministers,” the sources said.

“The decision to withdraw perquisites is symbolic, as it will not have any meaningful impact on the revenues,” the sources said and added, “However, it is necessary before the government asks people to pay taxes.”

The sources said perquisites of the president, provincial governors and federal ministers will be withdrawn.

According to Section 51 of the Income Tax Ordinance of 2001, the President of Pakistan, provincial governors and services chiefs are entitled to occupy free of rent as a place of residence any premises provided by the government..

Similarly, provincial governors, services chiefs and the corps commanders are entitled to free conveyance and sumptuary entertainment) allowance granted by government. The cost of the facilities is excluded in their tax calculations.

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 Under Section 53 of the Income Tax Ordinance, federal ministers are also entitled to rent-free accommodation, house-rent allowance paid by government in lieu of rent-free accommodation, free conveyance and sumptuary allowance. The PTI government wanted to withdraw those tax-free privileges being enjoyed by the ministers.

There is also a proposal to withdraw tax-free perks being availed by a judge of high courts and the Supreme Court. The judges are entitled to use official car maintained at the government expenses. Their superior judicial allowance is also tax free, according to the Income Tax Ordinance.

The transfer allowance payable to a judge of high court is also tax free.

Similarly, Supreme Court judges are entitled to tax free services of a driver and an orderly, 1,000 free local telephone calls per month, 1,000 units of electricity as well as (25hm3 of gas) per month and free supply of water; and 200 litres of petrol per month.

All such facilities are tax free during the service of a judge and after his retirement, according to income tax law.

The last PML-N government had also tried to withdraw tax exemptions on the privileges of head of the state, provinces, federal ministers, judges and chiefs of the armed forces. But it then dropped the plan.

(This news/article originally appeared in The Express Tribune on September 13th, 2018)

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