Tax rebate available to teacher/researchers was reduced from 75 percent to 40 percent. For access to banking information, the government decided that the information accessed is not by an ordinary field officer of the tax department. It is only the Board, defined as Board in counsel with chairman and members, which can access the information. Zero-rating status of stationary items, milk and dairy products, and bicycles was restored to provide relief on these items.
The government decided that the present rate of withholding tax on cellular users be increased from 10 percent to 15 percent. Federal Minister for Finance, Senator Ishaq Dar on Saturday while concluding debate on Budget 2013-14 in the National Assembly, said that the government accepted 21 out of 112 proposed recommendations of the Upper House of the Parliament.
TAXATION PROPOSALS The Finance Minister said the most debated tax proposal is the increase in the GST rate from 16 percent to 17 percent. He said that in the current year, there is a revenue shortfall of Rs 374 billion in FBR collections. He said "against a budget estimate of Rs 2,381 billion, we are expected to end the year, with difficulty, at Rs 2,007 billion." He said that the budget target has been missed with a massive margin this year.
Dar said that on top of the revenue shortfall there is an overrun of Rs 602 billion in expenditures not counting the circular debt of Rs 503 billion of which Rs 326 billion would be paid during the current yea.
Dar said that expenditures laid down before the House can be postponed so it is necessary to mobilise tax resources otherwise the government would be left with no option but to print money. He said this would be extremely imprudent, as it would unleash explosive inflation that will hurt the poor more than the rich. He said that 1 percent increase in GST was in place a couple of years ago; and then GST was reduced from 17 percent to 16 percent, adding that 17 percent GST is not a rate too out of line with those prevailing in other countries like ours. However, he assured that as soon as revenue position so permits, the rate will be reduced.
TAX ANOMALIES FOR SALARIED TAXPAYERS He said the government has decided to rationalise the tax slabs and make necessary adjustment in the proposal so that the tax liability of those having an income Rs 2.5 million or less will have the same tax liability as previously.
RENTAL INCOME In the light of the recommendations given by the Parliamentarians, the government decided to tax rental income at two withholding rates of 10 percent and 15 percent, which will be adjustable at the time of final assessment. He said that in budget 2013-14, the government proposed to raise the tax and to introduce several slabs going up to 17.5 percent.
TAXATION PROPOSALS RELATING TO ACADEMICS Ishaq Dar said that it has been decided that the rebate provided to teachers/researcher would be reduced from 75 percent to 40 percent, so that the concession is not exploited. About the tax free status to non-profit institutions, he said that proposal related to withdrawal of a clause that accorded tax-free status to non-profit institutions was construed as a move toward taxing the surplus income of such institutions. He added that there is no truth in this. All that is intended is that such institutions will now seek a one-time certification of their non-profit character from the Commissioner of income tax and afterward they will continue to enjoy the tax-free status.
ACCESS TO BANKING INFORMATION The minister submitted three proposals before the House about access to banking information: (1) the proposed move is completely in line with how the world is moving and it will be imprudent to ignore all that is happening around the world. It is also needed to prevent any perceptions that Pakistan's banking and taxation systems are not synchronised or that our banking system can be abused as a safe-heaven for tax evasion; (2) the information accessed is not by an ordinary field officer of the tax department. It is only the Chairman and Members of the FBR, who can access the information; and (3) there is significant protection available in law against the possible abuse of this information by tax authorities. As provided in sub-section 4 of the proposed section, the information so obtained from a banking company is declared as information under Section-216 of the Income Tax Ordinance, 2001, which makes it confidential and prevents its dissemination by a public servant. Under Section-198, any violation of Section-216 is an offence punishable with fine and a prison term of up to 6 months. To further strengthen this punishment, it is now proposed to raise the fine to a minimum of Rs 500,000 and to increase the maximum punishment from 6 months to one year. With such heavy penalties no one should doubt that any public servant, that too at the level of the Board, will ever dare divulge this information for any purpose other than what it is intended for.
RELIEF FOR STATIONARY ITEMS, MILK, DAIRY PRODUCTS AND BICYCLES Dar said that some honourable members have also objected to elimination of zero-rating status to stationary items, milk and dairy products, and bicycles. We have decided to accept their suggestion and restore their zero-rating status, consequently there should now be no change in prices of these times in the market, he said.
INCREASE IN WITHHOLDING TAX ON CELLULAR USERS The Finance Minister said that in consultation with stakeholders it has been decided that the present rate of withholding tax on cellular users be increased from 10 percent to 15 percent, which is adjustable at the time of final assessment. He said that this proposal has been accordingly incorporated in the budgetary proposals.
IMF PROGRAMME Dar said that the time to amortise the IMF loans drawn by the previous regime is now upon us, and we are required to pay back a huge amount of $3 billion during 2013-14. Consequently, it has become imperative to engage the IMF and other IFIs so that we can amortise the loans obtained by the previous government (which have already been used). He assured the House that during this process, the national interest of Pakistan and its people will be the primary focus. We have never before, nor will we now, compromise on the national interest, he said.
INCOME SUPPORT PROGRAMME He said that the Prime Minister's Youth programs, small loans, microfinance, housing finance support, education fee support and others will all be part of the larger Income Support Program. He said that the government has allocated Rs 75 billion for financial year 2013-14 against the revised estimate of Rs 40 billion, adding that "we have already announced a 20 percent increase in the monthly cash support."
TUITION FEES FOR HIGHER EDUCATION Dar said that as announced in the budget speech, the facility for the payment of tuition fees for higher education, which was earlier available to Balochistan, FATA, and Gilgit-Baltistan, has been extended to rural Sindh and all three Divisions of Southern Punjab, that is to say, Multan, Bahawalpur and D.G. Khan. Now on the advice of the members, he said that the facility is being further extended to include Malakand, Kohistan, and Dera Ismail Khan in Khyber Pakhtunkhwa.
SECRET SERVICE FUND The Minister said that the government has taken a historical step by eliminating the Secret Service Fund with effect from 11th June 2013. Now only national security related agencies will have the right to spend under the head of Secret Service, he said. He said that through the Finance Bill, these reforms are being included in the Auditor General's Ordinance 2001, so that no organisation other than national security related agencies can use the Secret Fund.
SECURITY OF OUR STRATEGIC ASSETS He said that it is extremely important to restrain our emotions, no matter how charged within the bounds of national security and "we must draw some red-lines that must not be crossed under any circumstances".
He said that the government has made the following submissions: (1) it is abundantly clear that Pakistan has a most responsible program of strategic assets fully compliant with all internationally accepted standards of safety and security;
(2) The program that evolved in separate units until 1999 was brought under a unified command called National Command Authority, headed by the Prime Minister of Pakistan. A Special Projects Division (SPD) co-ordinates the individual programs and weaves them together in a single national programme. A Strategic Forces Command is responsible for the security of the program; (3) A rigorous Regulatory Regime regulates all matters related to nuclear safety and security, including physical protection of materials and facilities, fissile material control and accounting, transport security, prevention of illicit trafficking and border controls; (4) A comprehensive Export Control Regime provides laws that are at par with standards followed by the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTRC) and the Australia Group; (5) The essential elements of the security regime are: (i) well trained, well equipped and dedicated security force of 25,000 personnel; (ii) A Special Response Force; (iii) A Special Escort Force; (iv) A Marine Force for shore-based facilities;(v) Counter Intelligence Teams; (vi) Personnel Reliability Programs; (vii) Modern technological equipment; (viii) Ground and aerial mobility for rapid response;
(ix) A dedicated SPD Training Academy for security training.
FARMERS The minister said that a huge amount of Rs 59 billion has been kept for this purpose. Subsidies for fertiliser have been raised from Rs 10 billion during the outgoing financial year to Rs 30 billion in 2013-14, he said. He said that the most notable thrust of the new government's economic policy is to make credit available to private sector, which includes farmers also.
He said both urban and rural populations need communications for their economics. He said that farmers will not be able to get good prices for their produce nor can urban producers be cost effective in the absence of communication links that can efficiently transport their products to target markets. The entire communication effort of Rs 73 billion is linked to the welfare of farmers and the poor, he said.