ISLAMABAD Reaffirming Governments determination to impose Value Added Tax from July 1, Prime Ministers Advisor on Finance Abdul Hafeez Sheikh on Monday hinted at major changes in the income tax rates without impacting low-income classes. Addressing a pre-budget seminar at the Islamabad Chamber of Commerce and Industry, he said that the agriculture tax was a provincial subject and all the provinces were totally independent whether or not levying any amount of farm tax. Listing out the PPP Governments priorities in the budget 2010-2011 to be presented to the National Assembly on June 5, he said protecting economic recovery by maintaining a fiscal balance was on top. That means that we should not do anything enthusiastic or under pressure from certain people that could derail this recovery drive, he added. Priority number two, he said, was checking the inflation. According to the Advisor who is to take oath as Senator on June 3 for onward appointment as Finance Minister to be eligible for presenting the annual budget in the National Assembly, the fiscal balance and inflation were interlinked. He said external borrowing had already touched 60 percent of the GDP after being doubled in the last four years. In case we take our external debt to GDP ratio further up, then it would be certainly alarming, he added. He believed that the domestic borrowing was even more dangerous as it sucked the liquidity leaving meagre capital for the private sector. Third priority in the budget would be not to forget the poor people. So there would be targeted subsidies for people living on or below the poverty line. The targeted subsidies would be aimed at bringing the poor people to centre stage of the economic management, he added. Subsides going to the rich in the name of poor such as PIA or PEPCO should be undone by all means in the next budget. Fourth, he said, the Government would keep the revenue mobilisation in focus. Our tax to GDP ratio is perhaps lowest in the world and we need to increase it, he underlined. Priority number five in the next budget would be the private sector development. This should be part of both the budget and overall economic management style of the Government. Public sector corporations in hegemonic position undermining the growth of the private sector should be restructured. And if they resist to the restructuring, they would be giving in the hands of the private sector management, the Advisor added. He revealed that the expense of running the entire civil administration was Rs 165 billion while the subsidy being given to the PEPCO alone was much more than that. He blamed the business community to ignore valuable budget proposals especially on the direct taxes while paying too much attention to the Value Added Tax. If you dont like the name of VAT, you are free to call it whatever you like but it is already there in the form of General Sales Tax, he added. The Advisor, however, failed to answer the question of taxing the 37 percent people in the country living below the poverty line under the consumption tax like VAT. He was of the view that the Government could not collect required revenue from the income tax and the wealth tax alone.