New taxes unlikely in Sindh’s deficit budget

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No new taxes are likely in Sindh’s budget for fiscal year 2011-12, despite the fact that the budget deficit is estimated to be more than Rs 26 billion, Pakistan Today has learnt. The decision not to impose new taxes has been taken in view of the upward increase in prices as well as the cost of doing business, which has risen due to a shortage of electricity, sources privy to the budget-making process told Pakistan Today. Some old taxes, however, are likely to be clubbed together to yield greater revenue, but the authorities are reluctant to push up their rates proper. The rates of some non-tax levies, including water tax on agriculture, licence fee, and tender fee, would be rationalised to improve resource mobilisation.
Sources said that the major non-development expense in this year’s budget will be in terms of the salaries to be given to approximately 40,000 new employees that were recruited by the present government. There has also been an increase in demand for grants by the Police Department (Home Department) due to prevailing law and order situation. The target of tax revenues would be achieved by at least 90 percent, but there is an acute deficit in non-tax revenue, sources disclosed.
After the recent National Economic Council (NEC) meeting, the provinces have been informed about their share in funds that the Centre will provide, under which the budget is being worked out. But the position of federal grants and transfers is much better as compared to the recent past, sources said.
The Annual Development Programme (ADP) in the new budget is likely to be enhanced by 10 percent, from last year’s Rs 115 billion (that was downsized to Rs 77 billion after the floods). Special attention in the upcoming ADP would be given to ongoing schemes while fewer new schemes will be included, sources explained, adding that funds not utilised would be diverted for projects already underway in an attempt to expedite their completion.
It is worth remembering here that Sindh’s major chunk of revenue is generated from six provincial taxes collected by the Excise and Taxation Department, and proceeds collected by the Sindh Board of Revenue on account of stamp duty, land users charges, water tax, licence and tender fee. However, the bulk of resources (about 85 per cent) come through federal grants, transfers and project aid.