Rs53 billion taxation sans representation! -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

Rs53 billion taxation sans representation!

Mehtab Haider

ISLAMABAD: The universally accepted democratic principle of ‘no taxation without representation’ was thrown in the bin on Tuesday when a desperate government imposed additional taxes of Rs53 billion through a presidential ordinance, eschewing bringing the matter to parliament for approval.

The controversial measure has been undertaken to achieve the revised target of Rs1,604 billion for the current fiscal year. This draconian measure of taxing-the-already-taxed to generate additional revenues is in line with the government commitment given to the IMF in the latest round of talks held in Islamabad.

The additional revenue generating measures imposed through this ordinance titled, the Sales Tax (Amendment) Ordinance 2011 to further amend the Sales Tax Act 1990, include 15 percent surcharge on income tax which is expected to yield Rs20 billion, withdrawal of sales tax exemptions for generating Rs25 billion and hiking the excise duty up to 2.5 percent to raise Rs8 billion in the last quarter of the fiscal year 2010-11. “We will generate Rs53 billion in three major taxes in the remaining period of the current fiscal year in order to achieve the revised target of Rs1,604 billion,” confided a top official of the Finance Ministry.

The presidential ordinance will also impose 17 percent GST on tractors and maintain the earlier 8.5 percent on sugar. There is a typical bureaucratic silent-killer here. While the government has kept the old 8.5 percent GST on sugar, but now it shall be calculated on an ex-factory price of Rs55 per kg instead of the earlier Rs28 per kg and this will immediately result in a price hike of Rs7-8 per kg.

The 15 percent surcharge has been imposed on tax liabilities exceeding the annual limit of Rs300,000. The withdrawal of sales tax exemption will result in imposing 17 percent standard GST on tractors and key other areas including fertilisers and pesticides. Five major exportable sectors including textile, leather, sports, carpets, surgical instruments will now be liable to 17 percent GST on the locally used products while zero rating regime would remain available to registered manufacturers cum exporters.

The hike of excise duty from 1 percent to 2.5 percent through the presidential ordinance will generate additional revenues in the range of Rs6 to 8 billion in April-June period of FY 2010-11.

The government has also slashed down expenditures by Rs120 billion through cutting down development and non-salaried spending for curtailing the budget deficit at desired level of under 5.5 percent of GDP for June 2011. The federal government has imposed a ban on all new hiring except those positions which have already been advertised and has also invoked other saving measures like slapping a ban on buying new vehicles etc.

The FBR had set annual tax collection target of Rs1,667 billion on the eve of budget, which was revised downward to Rs1,604 billion in the aftermath of severe floods in October 2010. It was decided at the time that the target would be increased to Rs1,630 billion, but the inability of the government to impose additional revenue measures from December resulted in further scaling down the target.

During the talks held between Pakistan and the IMF from March 1 to 11, the fund assessed that the FBR would not collect more than Rs1,550 billion without taking additional revenue measures. In order to achieve the Rs1,604 billion target, the FBR required additional taxes of Rs53 billion, and since the government was aware of its inability to steer this measure through the parliament it opted for the forever-convenient presidential ordinances.
Source: The News
Date:3/16/2011