KARACHI: The government has envisaged that tax-to-GDP ratio will be increased to 13 percent by 2016-2017 as a key target for medium term economic framework however; no serious efforts have been planned for addressing structural issues of the economy, Karachi Tax Bar Association (KTBA) said in the post-budget seminar.
Masoud Naqvi, country senior partner of KPMG Taseer Hadi and Co has encouraged the policy makers and said that the target of compressing fiscal deficit to four percent by 2016-2017 is appreciatable because the budget deficit of outgoing fiscal year is at 5.8 percent from previous year of 8.2 percent.
He lauded the government efforts which are being made in the 2013-2014 budget year, especially achieving the economic growth of 4.1 percent from 3.7 percent, as well as an increment in per capita income to $1,386 from $1,339.
It is also highlighted that failures of budget on economy is due to continued political confrontations and challenges which are being faced by the government including poor law and order situation and terrorism where $102 billion losses had incurred to the economy during 2001-2014 whereas strategy to handle terrorism still fragile, KTBA said.
It said, for the three years medium term economic framework inflation has been forecasted to be maintained at single digit, investment to be increased to 20 percent and in outgoing fiscal year forex reserves will also be increased to US$22 billion by 2016-2017.
In a budget government has set some targets for 2014-15 in which FBR is directed to increase tax revenue by 535 billion by which 231 billion from new tax measure and 304 billion from inflation and GDP growths impact.
Another targets for 2014-2015 fiscal year is to increase value added of power sector to 3.72 percent against -16.33 percent last year and 1700 MW added to National Grid Export promotion major thrust on export promotion which will create new 900,000 jobs.
It is also targeted that the government will raise investment growth by higher public sector development program (PSDP) in the country.
Naqvi said that medium tax 2014-18 strategy developed to lengthen maturity profile, to reduce the refinance risk with sufficient provision of external inflows and broaden the investor’s base.
Substantive work would be done on the Pak-China economic corridor and on major segments of the motorway from Lahore to Karachi as amount of Rs 113 billion has been allocated for infrastructure. It is envisaged that the spending on infrastructure will also provide significant employment opportunities.
For improving the railway system in the country, it allocates Rs 77 billion for various development schemes and employees remuneration.
It said that a focus on exports which include setting up of EXIM Bank of Pakistan with an initial capital of Rs 10 billion, reduction in mark up of Export Refinance Facility to 7.4 percent, reduction in mark up on long term financing for project loans to nine percent, restructuring of export development fund and establishment of Pakistan Land Port Authority.
The KTBA said in its post-budget seminar that incentives for textile sector include beneficial duty drawback rates where exports increase by 10 percent, implementing an expeditious refund system with the objective to resolve exporters refund claims within three months, duty free import of machinery extended to 2016 and training of 100,000 Pakistanis in the garments and made-up sector. The facility of loans at reduced rates will also be available to the textile sector.
The target of giving incentive package for the agricultural sector include the introduction of Credit Guarantee Scheme for Small and Marginalized Farmers, Crop Insurance Premium Scheme, Livestock Insurance Scheme, establishment of Warehouse Clearing House and increase in agricultural loans to Rs 500 billion.
Special incentives for Makran division, Gilgit Baltistan, district Swat and FATA include exemption from duties/taxes on imported machinery not manufactured in Pakistan, concessional Long Term Financing Facility and 50 percent air freight subsidy for transport of fruits and flowers.
It further added that initiatives will be taken in the housing sector include Low-Cost Housing Guarantee Scheme, setting up of a Mortgage Refinance Company with an initial government capital of Rs 1.2 billion, restructuring of HBFC and PM’s Low Cost Housing Scheme.