The federal government wants the provincial governments to take a lead on new development projects after the transfer of increased revenues to the federating units in the post-NFC award regime. Assuring the foreign investors of zero new taxes in the forthcoming federal budget, the visiting Finance Minister Dr Abdul Hafeez Shaikh told the members of Overseas Investors Chamber of Industry (OICCI) after the NFC award there has been a significant reduction in the center’s revenue share.
This, he said, had happened without a corresponding reduction in the federal government’s expenditures on account of debt servicing or other necessary expenditure on defense, security and ongoing projects.
He said his side was now expecting the provinces to take a lead on new development projects. Dr. Shaikh was accompanied by Secretary Ministry of Finance Abdul Wajid Rana, Chairman Federal Board of Revenue Mumtaz Haider Rizvi, Member Inland Revenue Shahid Hussain Asad and other senior FBR officials. The minister said despite global meltdown and challenging business environment, country’s 3.7 percent GDP growth during fiscal year 2011–2012 was comparable to growth rates across the region, excluding those in China and India. Further, Dr. Shaikh said the FBR had also been successful in generating 17 percent additional federal revenues in 2010–2011 that are expected to scale up further to 25 percent in the current fiscal. In his briefing to the finance minister, President OICCI Humayun Bashir said some 45 percent of OICCI members invested about $1 billion in 2011 and were planning to invest over $ 3b over the next two to five years.
Bashir said these numbers could be increased considerably if the government addressed key concerns such as security, energy shortage and ensure effective policy implementation. OICCI members raised important issues concerning the taxation structure in light of the upcoming budget, including loss of revenue accruing from the tax exempt sector and evasion in the form of rampant smuggling of consumer goods, especially under the garb of Afghan Transit Trade. Other taxation proposals forwarded to the government by OICCI focused on broadening of tax net through linkages of FBR databases with banks and other business centers, doing away with minimum tax and fixed tax regimes for companies, introducing a uniform tax rate of 30 percent for all businesses irrespective of their legal status, giving a one-time tax incentive for attracting Foreign Direct Investment, simplifying procedures for sales tax refund, allowing adjustments of sales tax on pharmaceutical inputs and reduction and consolidation of different levies such as stamp duty.
Dr. Shaikh appreciated the suggestions which, he said, would be given due consideration in the run-up to the budget.
