ISLAMABAD: While anticipations are that the oil prices will rise in the next financial year because of the government’s announcement in the budget to collect an additional 35 per cent under the head of petroleum levy, Finance Minister Shaukat Tarin sees no pressure on oil prices following an expected deal with Saudi Arabia and relaxation of sanctions on Iran.
While addressing a post-budget press conference, Tarin said that inflation was expected to remain below 10 per cent in the next fiscal year if no sharp hike in oil prices was witnessed in the international market.
Federal Minister for Industries Khusro Bukhtiyar, Adviser to Prime Minister (PM) on Commerce Razzaq Dawood, and Special Assistant to PM Sania Nisthar were also present during the press conference.
“We have planned a deal with Saudi Arabia on a deferred payment facility which would help us avoid oil pressure. On the other hand, the supply of oil in the international market is also expected to improve following the relaxation of sanctions,” he said while replying to a query about inflationary pressure in the next fiscal year.
The inflation had bubbled during the past few years in power of the Pakistan Tehreek-e-Insaf (PTI) government which damaged the ruling party politically.
The incumbent government has proposed a bigger additional revenue of Rs160 billion in the budget to come from the petroleum levy on oil projects which means petroleum prices would go up in the next fiscal year. The target for revenue collection from petroleum levy is Rs610 billion, up 35 per cent from the current year’s Rs450 billion that would now touch Rs500 billion by the end of the current fiscal year.
Additionally, Tarin said, “We have to increase agricultural productivity as we are importing wheat, sugar and other basic food commodities which ultimately enhance inflation.” He added, “The government has given incentives to the agriculture and industry sectors in the budget because it wants to increase productivity to control inflation.”
Talking about the woes of the farmers, the minister stated that middlemen were not only exploiting farmers but also the retailers and there was a need to increase the wholesale market. “When farmers will directly sell the commodities to wholesalers, the prices will eventually be stable,” he added.
The finance minister stated that now, the banks will give the credit not only to farmers but also to wholesaler-distributors and the government will give guarantees to banks. The commercial banks do not know how to deal with the farmers so that’s why they are not providing credit to the poor masses, he said.
Speaking about poverty alleviation initiatives, Tarin informed that the government would target four million poor households as per the survey conducted by the Benazir Income Support Programme (BISP). “Government will give Rs0.2 million loan to rural and Rs0.5 million to people of urban areas to support their livelihoods,” he added.
The finance minister further stated that the government had given incentives to industries as well as agriculture sectors in the upcoming budget, adding that the country needed sustainable and inclusive growth which could be achieved by providing incentives.
FM Tarin also said that the government will also focus on export, saving rate and increasing revenue on the recommendation of subgroups of Economic Advisory Councils (EAC).
“Presently, we will have to enhance our exports from 8 per cent to 20 per cent, revenue growth from 9 per cent to 20 per cent GDP and savings rate from 8 to 10 per cent in the next 10 to 15 years in order to build foreign exchange reserves,” said the finance minister.
Speaking about the Federal Board of Revenue (FBR), Tarin said that we have assured international lenders that the government will broaden the tax base from 3 million to 10 million in the next few years. Additionally, the government is also planning to integrate 0.5 million Point to Sale (PoS) machines with FBR’s systems.
He revealed that retailers around the country had around Rs1.5 trillion in sales but revenue collection was not up to mark. Therefore, the government had decided to start a reward scheme of up to Rs1 billion for those customers who would push retail outlet owners to give cash receipts.
He also said that the court will announce the verdict on the Track and Trace system next week, following which the system will be implemented from July next year.
About the next fiscal year’s revenue target, the finance minister said that the government was realistically aggressive about revenue collection and if the target was achieved, the government would get the required fiscal space.
The finance minister stated that Pakistan was becoming an exporter rather than an importer.
“We have abolished the tax on special economic zones to attract the Chinese investors,” he added.
About the power sector, the finance minister stated that the government had allocated Rs370 billion as sector subsidies in the recent budget. “We allocated more money to the power sector just because we want to reduce the losses of the sector,” the minister added.
“Though the IMF has asked to increase the tariff, we want to control the losses with our own plan. We will improve the recovery by outsourcing the collection system,” FM Tarin said.
Govt to introduce prize scheme to broaden tax net
In order to broaden the tax net, Finance Minister Shaukat Tarin announced Saturday that the government will bring in a prize scheme to encourage people to demand proper receipts for purchases they make from retailers.
The minister said the government will introduce a scheme under which prizes amounting to Rs250 million will be distributed among receipt holders every month, which would help in documenting the economy.
The finance minister stated that the FBR had started collecting data to identify potential taxpayers who were eligible to pay taxes but have not yet been brought into the tax net. “About 312,000 potential taxpayers can be brought into the tax net through these measures,” he added.
Tarin stated that roughly 10,000 PoS machines were currently being used but their number would be increased to 60,000 soon. The minister stated that the government expected to collect Rs100 to Rs150 billion in additional revenue through the PoS machines.
He further said that the tax collection target for the next fiscal year had been set at Rs5.8 trillion, which he hoped will be achieved through innovative approaches including the use of the latest technologies.
No duty on internet and phone calls
The finance minister also clarified that the proposed tax on extra usage of the internet and prolonged calls had been withdrawn following the cabinet decision. The same was earlier discussed in the cabinet where it was opposed.
The finance bill had proposed an additional Re1 per call if the duration exceeded three minutes, Rs5 per GB for internet usage, and 10 paisa on each SMS. The news reached the general public that taxes and duties had been enhanced, following which the users stormed social media with criticism of the government saying that the budget had killed the Digital Pakistan initiative of the prime minister.
No mini budgets in FY21-22
Tarin further informed that though the incumbent government had been introducing mini budgets and finance bills after annual budgets, this time around, there would be no such measures.
“We would not introduce any mini budgets in the next fiscal year,” he said.
The finance minister further claimed that his government would try to get the rate policy down in the next financial year. “I am not promising or making any policy statement in this regard at this stage. I hope and pray for a further slide in interest rate,” he added.