LAHORE – Agriculturists and businessmen have taken strong exception to the imposition of fresh taxes and termed it a drone attack on the Pakistani people, while economists believe that the government is trying hard to convince International Monetary Fund (IMF) and other donor agencies for receipt of a clean bill of health.
Business community underlined that the price of every product, including sugar, wheat, rice, vehicles and household commodities will surge after imposition of 15 percent surcharge on payable income tax during the financial year 2010-11 and an increase in Excise Duty and Sales Tax on all inputs including imports and withdrawal of 17 percent GST exemption on fertiliser, pesticides, tractors, leather, sports and surgical instruments.
However, former Federal Finance Minister Dr Salman Shah said that the government took revenue measures to ensure IMF that Pakistan would achieve the growth target of 4.7 percent. He said that if the government successfully achieves the criteria determined by the IMF then it would be easy for Pakistan to convince other donors, including the World Bank and Asian Development Bank to start disbursements of previously halted payments.
Responding to a query Dr Shah said that inflation was a global phenomenon. He stressed that commodity prices are at an all time high the world over, but revenue measures would enhance the country’s ability to negotiate with donors. However, he underlined that it was a result of the negligence exhibited in the previous three years as the government had failed to implement any new reform.
“It could neither clear the circular debt nor revive investment in the country”. He pointed out that the government borrowings had increased by Rs 5,000 billion and rupee had slided, which resulted in huge resources being committed to debt servicing. He stressed that these were all short term measures and the government was not addressing the economic problems in true sprit.
He said that had the government responded to these issues in a timely fashion, there would have been no need of this mini budget. The Lahore Chamber of Commerce and Industry (LCCI) President Shahzad Ali Malik, Senior Vice President Sheikh Mohammad Arshad and Vice President Sohail Azhar stated that the decision would bring a tsunami of inflation that would be on a wholly unprecedented scale.
They stressed that it was very unfortunate that the ‘mini budget’ was announced at a time when the government was bridging the resource gap by printing new notes worth over Rs 2.0 billion daily. “As incomes are stagnant or declining in the last three years and the average increase in energy tariffs has been very high, even one or two per cent increase in taxes will have massive repercussions.”
In addition they pointed out that, “The draconian measure of taxing the already overburdened for generating additional revenue on the dictate of the IMF will give a bad name to the government as the prices of a number of items including clothes, shoes, fertiliser, sports goods and tractors will surge in coming days. The LCCI office bearers said that the body understands that the broadening of tax net is the only way out but it definitely wants all tax related measures in consultation with the business community.
The LCCI office bearers said that in the wake of acute shortage of electricity and gas, the business community will not accept the recent decision. The LCCI office bearers said that the economy is already facing multiple internal and external challenges while investment is declining with every passing day due to the deteriorating law and order condition.
Kissan Board Pakistan (KBP) President Sardar Zafar Hussein and General Secretary Malik Muhammad Ramzan Rohari pointed out that the imposition of sales tax on agricultural inputs like fertiliser, tractors, pesticides and other agricultural implements would give a strong push to already spiking prices. They alleged that this would place these items beyond of the purchasing power of the farming community.
They also criticised a two percent increase in electricity tariff and said it would make impossible to use tubewells for farm irrigation. They claimed that the agricultural sector, directly or indirectly, had to pay Rs 30 billion out of a total of over Rs 50 billion tax measures taken by the government.
Leaders of the agricultural community said that fertiliser manufacturers had already earned Rs 28 billion from the growers by making an increase of Rs 400-500 per bag of fertiliser. The KBP leadership urged rulers to support the dying rural economy and withdraw the newly imposed taxation measures immediately.
