ECC rejects hike in sales tax on sugar

June 14, 2010 by admin · Leave a Comment 

ISLAMABAD: The Economic Coordination Committee (ECC) rejected on Tuesday proposals to increase by 25 per cent transportation charges for 400,000 tons of urea imported through Gwadar port and to double sales tax on sugar.

The meeting, presided over by Finance Minister Dr Abdul Hafeez Shaikh, strongly criticised the ministry of industries for using a few selected companies to transport urea from Gwadar to upcountry in violation of Pakistan Public Procurement Authority (PPRA) rules and sought a complete report before the next ECC meeting.

Informed sources told Dawn that Minister for Law and Parliamentary Affairs Babar Awan initiated the criticism of a fellow minister who earlier headed the industries ministry and faced a National Accountability Bureau reference in another case for giving urea transportation contracts after November 2008 to a couple of companies of his choice without inviting open tenders as required by procurement rules.

Mr Awan’s arguments, the sources said, were picked up by Dr Shaikh who made it clear that he would not allow blanket increase in transportation charges and would like to see if PPRA rules were violated in previous transactions. After a heated debate, the ECC asked the ministry of industries to take its summary back and provide information to the ECC about previous transactions.

The PPRA should either be abolished or its rules should be followed, a senior government official quoted Dr Hafeez Shaikh as saying.

The ministry of industries had requested the ECC to increase transportation charges of imported urea from Gwadar by more than 25 per cent to Rs96.20 per bag. The government has decided to import about 400,000 tons of urea for the current Kharif season from friendly countries through Gwadar port.

The import is to be made by the Trading Corporation of Pakistan (TCP) for distribution through the National Fertiliser Corporation (NFC) till December.

The sources said Dr Shaikh also did not accept a proposal from the Federal Board of Revenue (FBR) for increasing the general sales tax on sugar from 8 to 16 per cent within a week of the budget announcement. He said when the proposal had not been made part of the budget the FBR should wait for another three months when the current GST regime would be replaced with value-added tax or a reformed GST scheme in October.

The meeting also deferred the issue of curtailing gas supplies to the fertiliser sector. Some ECC members were of the opinion that a recent reduction of gas supplies for two months of winter in the midst of gas shortages had prompted manufacturers to enhance urea prices by Rs100 per bag. They were of the view that such an option in future would result in import of the expensive fertiliser, which would be unaffordable and hence should be avoided.

The meeting asked the authorities concerned to look into the implications of the proposal and present a detailed report at the forthcoming energy conference.

An official statement said the committee reviewed the sugar stock and decided that the demand of 1.2 million tons will be met through import, as decided earlier by ECC. The meeting formed a committee comprising ministries of Industries and Commerce and FBR to monitor prices of white sugar in the international market.

Discussing the issue of monetisation of Pure Terephthalic Acid (PTA), the ECC decided to withdraw SROs No.1045(1)/2008 and 1299(1)/2008 to enable the government to meet international standards in this regard. However, a summary would be presented at the next ECC meeting suggesting a tariff mechanism, the statement said.

- Dawn News

Budget 2010-11:a difficult budget in difficult times

June 14, 2010 by admin · Leave a Comment 

ISLAMABAD: The government on Saturday announced a consolidated budget outlay of Rs 3.259 trillion for next fiscal year, with 4 percent budget deficit, and what the Federal Finance Minister was careful to refer to as deferring the reforms of GST, understood by the galleries as reluctant to use the three-letter word ‘VAT’, till October 1, 2010 instead of July 1, 2010, but increased the GST from existing 16 to 17 percent.

VAT MADE TO WAIT TILL OCTOBER 1 The total revenue is projected at Rs 2,574 billion while gross federal tax and non-tax revenue are projected at Rs 2,411 billion. The Federal Board of Revenue collection is estimated at Rs 1,667 billion or 9.8 percent of the GDP. The provinces would be transferred Rs 1,033 billion in the next fiscal year under 7th NFC Award as compared to Rs 655 billion estimated for the on-going fiscal year. The federal budgetary outlay is proposed at Rs 2.229 trillion or 13.9 percent of the GDP.

Dr Abdul Hafeez Sheikh who took oath just a few hours before the budget as Finance Minister to present his first and the third budget of the incumbent government, announced that the federal government employees would be allowed an ad hoc monthly allowance equal to 50 percent of one month’s basic pay and announced to freeze all the current expenditure of the government, except salaries under austerity measures.

However, the benefit of ad hoc increase would not be available to the federal government employees who are already recipient of a monthly allowance equal to one month’s basic pay. The minister said the budget is one important instrument of economic management however, the importance of this one-year ritual should not be over exaggerated.

The government also announced to double the medical allowance for employees working in BS-1 to 16 and increased the medical allowance by 15 percent of those above Grade 16. The pension of those who had retired after 2001 was increased by 15 percent and those who had retired before 2001 by 20 percent. The minimum monthly pension was proposed to be increased from Rs 2000 to Rs 3000 while the rate of family pension was enhanced from 50 to 75 percent. The government also announced a scheme for providing employment to the 200,000 unskilled in rural areas with an amount of Rs 5 billion.

Federal Excise Duty (FED) has been increased by Rs 1 on per filter rod of cigarettes and FED on natural gas to Rs 10 per mmbtu besides levying FED @ 10 percent ad valorem on air conditioners and deep freezers. Hafeez said no custom duty on any product would be increased rather duty on 29 categories of products has been reduced to lower the burden of dearness on the people.

He said continuous changes in the GST have distorted the tax and the government wanted to reform it to make it uniform rather than multiple tax rates between 16 to 25 percent. The education, food and health would be exempted under reform mode of GST, government intends to implement from October 1, 2010 by taking on board all the provinces. The proposed GST reform would not apply to turnover less than Rs 7.5 million per year whereas the current threshold is Rs 5 million per year. This would help broaden the tax net instead of burdening the existing taxpayer.

Outlining the ultimate objectives of the budget, the Finance Minister said priorities would be to protect the growth by enforcing fiscal austerity, eliminating waste and tightly controlling expenditure, curtailing inflation, which is primarily a monetary phenomenon, reducing borrowing from the State Bank of Pakistan and achieving a measure of self reliance through better domestic resource mobilisation.

We are playing with fire by borrowing excessively and have to move towards self-reliance. The government would provide targeted subsidy to the poor, reduce burden of public sector enterprises and would ensure that the economic recovery is employment oriented. The ongoing energy shortage and law and order situation are major hindrances in the way of economic growth, the minister added.

The minister said the first differentiation is that this budget is based on transparency in the budgetary process involving widespread consultation while the second differentiating feature is that the budget is realistic while third feature of the budget is that this is the first post-NFC budget.

He said that the co-operation, partnership and enhanced role for the provinces is an integral part of the budget and provinces would be transferred additional resources to spend on law and order, education, health drinking water and municipal and ultimately reduce fiscal space of federal government.

Another feature of this budget is that the government is operating in the framework of international commitments. “It is important that we as a sovereign nation keep our commitments and do not erode our international credibility,” he said, adding that while maintaining international obligations we must ensure that we become self-reliant and less dependant on foreign borrowing and assistance.

- Business Recorder

Pakistan’s working class a reason to exhale

June 14, 2010 by admin · Leave a Comment 

Dubai: Salaried people experienced major relief after the Dh140 billion ($38.3 billion) Pakistan budget announced on Saturday for the 2010-2011 fiscal year starting July 1.

Pakistani Finance Minister Abdul Hafeez Shaikh said the budget provides tax relief to salaried people, in addition to a 50 per cent increase in basic pay for all government employees.

The allowance will benefit nearly two million civilian employees and defence personnel employed by the federal government.

An economic survey for the past fiscal year had put the rate of inflation during the outgoing fiscal year at more than 13 per cent compared to nearly 24 per cent during 2008-2009.

Another major relief was an increase in the exemption from income tax from Rs200,000 (about Dh9,180) to Rs300,000.

Internal resource mobilisation has been estimated at Dh75.9 billion while the balance is projected to be netted by foreign aid, foreign and local borrowing.

The total size of the budget for the next year has been fixed at Rs3.259 trillion, a 10 per cent rise, with a budget deficit of Rs685 billion, or four per cent of gross domestic product (GDP). The social development allocation is Rs766.5 billion.

“People are at the heart and centre of this budget,” Shaikh said in his budget speech.

“The best relief package that a government can give to its people is to reduce inflation because it is detrimental to poor sections of the society,” he added.

“We are seeing the beginning of recovery. Inflation has been checked from a peak which had reached 25 per cent,” he said. In April, the inflation rate was 13.3 per cent.

“In GDP a turn around is being seen, it has reached 4.1 per cent, our foreign currency reserves have reached $16 billion, remittances have increased to $8.5 billion,” Shaikh said.

The budget sets a tax revenue target of Rs1.779 trillion, compared to last year’s Rs1.494 trillion — an increase of about 19 per cent. The Federal Board of Revenue has been given a collection target of Rs1.667 trillion which is 20 per cent higher than the current year’s target of Rs1.380 trillion.


The Finance Minister said the budget aimed at seven major objectives — protecting economic recovery, controlling inflation, achieving self-reliance through domestic resource mobilisation, targeted social protection regime for poverty reduction, controlling losses of public sector entities, reducing unemployment, improving investment climate and overcoming energy shortages.

The FBR’s revenue target of Rs1.667 trillion includes direct taxes of Rs657.7 billion and indirect taxes of Rs1.121 trillion. Direct taxes are about 22 per cent higher than the current year’s revised estimate of Rs540.4 billion. Indirect taxes are about 19 per cent higher than the current year’s Rs943 billion. Indirect taxes include Rs675 billion sales tax, Rs153 billion federal excise and Rs181 billion customs duty.

Against a total outlay of Rs3.259 trillion, the new budget forecasts total revenue at Rs2.574 trillion, leaving a fiscal deficit of Rs685 billion.

The next year’s current expenditure has been estimated at Rs1.998 trillion against the current year’s original estimate of Rs1.699 trillion, up about 17.6 per cent. This includes expected defence expenditure of Rs442 billion which is 17 per cent higher than the current year’s revised estimate of Rs378 billion.

An amount of Rs873 billion has been set aside for debt servicing, compared to the current year’s revised estimate of Rs815 billion, showing an increase of about seven per cent.

- Gulf News