Himalayan News Service

Islamabad, June 1:

Pakistan is to broaden its tax base by including the informal and realty sectors as it targets collections of Rs 700 billion ($11 billion) in its Rs 1.2 trillion budget for fiscal 2005-06 beginning July 1.

Officials of the finance ministry and the Central Board of Revenue (CBR) have indicated that major tax reforms, like across the board reduction in income tax rates, strengthening of general sales tax at the retail stage, extension of sales tax net to exempted services and documentation and tax number requirements on real estate deals and cash transactions in banks are under consideration.

“The budget will be growth oriented, with focus on broad-basing the tax system, simplification of procedures and some relief measures for the people,” The News Wednesday quoted economist Salman Shah as saying.

Shah, who has been presiding over budgetary meetings in the finance ministry, said the major emphasis would be on sustaining growth at seven to eight per cent for next few years. This would require greater focus on human resource development, modernisation of infrastructure and effective utilisation of funds.

According to Shah, the government would enhance allocations for education, health, water supply and urban infrastructure development. “The spurt in growth over the last two years has jacked up the economy from $95 billion in 2003-04 to $123 billion projected for 2005-06. Tax revenues during this period have failed to match the pace of growth and inflation,” The News noted.

Another grey area for the budget makers is the loss of the Petroleum Development Levy (PDL). The finance ministry projected revenues of over Rs.46 billion revenues under this head during the current year, but ended up collecting nothing. Then, tax collection in relation to GDP has been falling in recent years and the government wants to reverse this trend.

For this, many exempted categories like individuals, businesses and small and medium enterprises in the informal sector are being targeted. The government is considering various proposals to launch an extended self-assessment scheme with returns not being questioned. Officials feel this guarantee for new taxpayers is necessary to bring them into the tax net.

The property business is also being targeted. “Huge stocks of black money that used to be put in the foreign currency business have been parked in the shady property deals by the influential.

The real estate sector is also the central place for benami transactions. In all major urban centres, people have purchased a large number of plots with money invested by someone else,” The News said.

“Effectively, regulations like mandatory tax number requirement, transaction fee and legal conditions for clear land titles are being considered to rid the property business of black money,” it added.