Talking to Business Recorder, Miftah Ismail said, "I am in much better position to take decisions to rationalize some taxes compared to my predecessor." However, he made it clear that subsidies other than power tariff differential would not be acceptable. He dismissed the possibility of raising loans from the international capital market by issuing bonds during the remaining two and a half months of the tenure of the incumbent government due to high interest rate and stated that every possible effort will be made to complete two privatization transactions - Mari Petroleum Company Limited and SME Bank - in the current fiscal year.
Ismail said, "Pakistan's export growth should be reflected in currency and not in subsidies," adding the decision to impose regulatory duty on a list of items in October 2017 to discourage imports subsequent to increase in current account deficit is going to be reversed in the budget for the next fiscal year scheduled to be announced in April 2017.
Ismail further said that the government will provide relief to the stock market in the budget, though he did not disclose specific budget proposals in this regard. He said that he would support the proposal to abolish tax on bonus shares and was not in favor of taxing capital formation. "We will very seriously and closely consider their request to abolish tax on bonus shares," he said. Five percent tax on bonus shares had been introduced in Finance Act, 2014.
Miftah Ismail said he supported capital gains tax because it is imposed on the rich only. There should be capital gains tax on immovable properties as well as stock market but the issue of holding period would be looked into in the coming budget.
The Advisor said that a major change in withholding tax regime in the coming budget is being envisaged: the current practice of some withholding taxes having full and final tax liability would be allowed to be adjusted to encourage voluntary compliance in filing of income tax returns.
He further stated that there would be no major change in sales tax zero-rating regime for five export-oriented sectors and zero rating regime would continue; and hinted at the possibility of removal of super tax that was imposed to finance Zarb-e-Azb and if "we can meet our expense without it we will withdraw it". Ismail said that the economic situation is now much better and the government can consider its withdrawal.
Ismail added when he took over the Finance portfolio, growth was high, revenue was increasing and inflation was below 4 percent as compared to much worse economic condition that the PML-N government inherited in 2013. He said that the standard rate of 17 percent sales tax would continue and there is no proposal to change it.
Ismail further stated that 19.5 percent growth in revenue is required to achieve Federal Board of Revenue (FBR) revenue collection target of Rs 4 trillion for 2017-18 and was optimistic that the target will be achieved given the current pace of revenue growth.
Ismail said Public Sector Development Programme (PSDP) allocation in the budget will be only for existing projects and no new project will be considered. He was upbeat that the government will be able to limit the fiscal deficit to 5 percent of GDP for the current fiscal year if 0.5 percent surplus was generated by the provinces for the current fiscal year.
He added that the Prime Minister will take a decision about the tax amnesty scheme aimed at bringing home the money held abroad by Pakistanis and stated that "the scheme will be announced before the budget".
He spoke about the 7th NFC award and stated "it created serious imbalance" as the tilt of resources was shifted towards provinces making functioning of federal government enormously difficult. The sooner this imbalance is corrected, the better it will be for Pakistan, he added.
Ismail maintained that tariff differential subsidy will continue in the budget for next fiscal year and circular debt issue will be resolved as soon as approval of the Economic Coordination Committee (ECC) of the cabinet is notified. He did not agree that debt was increasing and stated that domestic debt decreased during the first six months of the current fiscal year as compared to the first half of previous fiscal year.