Subsidy on Atta, pulses, ghee not withdrawn
By Khalid Mustafa
ISLAMABAD: Minister for Finance Dr Hafeez A Sheikh, in a post-budget press briefing here on Sunday, said the government had frozen the current expenditures for 2010-11 at the level of the outgoing financial year’s expenditures to help decrease inflation and achieve the budget deficit target of 4 per cent.
The economic czar, who seemed visibly perturbed over budget reporting for not highlighting the government’s initiatives to provide solace to the people, argued that the freezing of current expenditure will not only ensure a decline in inflation but will also help harness the budget deficit target of 4 percent of the GDP.
“With this step, the demand for borrowing from the banks would tumble and will curb inflation and the cost of doing business in the country will also come down.” He said that the government had not withdrawn the subsidy on Atta, ghee, pulses and rice, complaining that the media had misunderstood him.
When he was shown the budget documents in which it was clearly shown that no subsidy had been mentioned on the said items, Dr Sheikh, after realising that it was basically the fault of the budget makers, said: “Let that be put to rest and the said items would continue to have the subsidy. In addition, we have not increased Customs duty on any items, rather decreased the duty on 29 items just to provide relief to the general masses.
“We have increased income tax exemption limit for salaried taxpayers from Rs 200,000 to Rs 300,000, benefiting approximately 430,000 taxpayers. The exemption limit for non-salaried income has been raised from Rs 100,000 to Rs 300,000 per year, benefiting about 350,000 tax payers.”
However, the minister took an unconvincing stand that 17 percent GST will not be inflationary, arguing that when the government wants to bring GST by 15 percent with zero exemptions, then powerful lobbies make the propaganda that GST with 15 percent will too bring inflation.
He said that country was in dire need of increase in revenue generation and 17 percent GST will be just for three months under an interim arrangement. He hoped that the Centre and provinces will develop a consensus on VAT by October 1, 2010.
When asked if the government had taken the IMF into confidence for deferment of VAT implementation for three months, the minister said that IMF did not act as the mighty one with a stick in hand as it was a partner with Pakistan and our country was sovereign.
He posed the question to journalists as to why it was not published that the Government of Pakistan had shown its sovereignty by not imposing VAT from July 1 and deferred it for three months.
The minister said that VAT will help document the economy and had no inflationary impact too. When quizzed as to why the government has not pulled out the exemptions from the influential five major sectors of economy that include textile, leather, sports, surgical goods and carpets, the minister avoided to respond.
However, a senior official of Ministry of Finance explained that the government did not impose 17 percent GST on the said exempted sectors, as it wanted them to bring in the tax net under the VAT regime. “If 17% GST is imposed, then they might resist more in joining the VAT regime.”
The government factually, the official said, wants to document their economic activities with the help of VAT regime, so it is deemed fit that the GST exemptions should continue to them as 17% GST regime will be for just three months.
Talking about the 10 percent reduction in salaries of the cabinet members, the minister cleared saying that their salaries have not increased in the budget and if the increase is mentioned in the budget documents, that stands canceled. “However the 10 percent reduction will be applied on their running basic salary.”
As far as the 50 percent increase in salaries of the government employees is concerned, Salman Siddique, Secretary Finance said on the occasion, that 50 percent increase will be applied on running basic salary.
However, he said it would not be applied to contractual employees. However, one of the top officials told that the 50 percent increase in federal government employees’ salaries will have impact of Rs18 billion on national exchequer and if kept in view the whole package that includes increase in salaries, pensions and increase in medical allowances, then whole impact translates into Rs30 to Rs40 billion.
About the increase in rental ceiling of the government employees, the minister said that demand from the government employees is justified, but the government does not have enough resources to cope with this issue.
When asked for less allocation for social sector, Dr Sheikh said that under new social contract with the provinces, these two subjects have been transferred to provinces. The financial resources have also been increased to the four federating units from 50 to 57 percent.
“In my view, allocation for these sectors is not the issue, rather the issue is how to make hospitals and schools operational of which many of them are just buildings and no doctor and teacher is available there.”
He further went on to say that provinces have now become bigger players in the economy and the towering figures of the country with political acumen have decided to divert the massive financial resources to the provinces. “Now the responsibilities lie with the federating units to allocate more for social sectors which include health, education and even law and order.” APP adds:
The importance of Federal Budget has decreased as compared to the past, while that of provincial budgets has increased, Hafeez Shaikh said. “In the current budget, portfolios like law and order, health, education and provision of drinking water have been handed over to provinces, which is a big development as its benefits will directly trickle down to the common man,” he said.
Dispelling the impression that the size of Public Sector Development Programme (PDSP) of the federal government has been decreased he said that more share has been transferred to the provinces for carrying out development projects in accordance with the needs of the people.
The finance minister said that current ad hoc 50% relief would also not be provided to the police, armed forces and judiciary as their salaries were already increased to 100 %. A senior journalist Muhammad Aftab, in his question, objected to Fata being provided heavily subsidized electricity, saying that the practice was challengeable in the Supreme Court of Pakistan.
Hafeez Shaikh said subsidy was being given to other areas also in one form or the other, while Secretary Finance said that free electricity was being provided in Fata because it was a conflict-ridden area.
There was a peal of laughter when President of Pakistan Federation Union of Journalists (PFUJ), Pervez Shaukat pointed out the spelling mistake on one of the banners. Economics was spelt as Ecomomics.
Source: The News