PBC for cut in budget deficit

KARACHI - The Pakistan Business Council (PBC) has recommended to the government to improve countrys fiscal policy by lowering the size of budget deficit and increasing tax-to-GDP ratio. If government takes all corrective fiscal measures with an aim to ensure macroeconomic stability, then it is expected that tax-to-GDP-ratio would reach 15 per cent over the next five years and sustained fiscal deficit would not exceed 4 per cent of GDP by 2015, this was stated by the members of Pakistan Business Council while addressing a meeting held at PBC premises here on Wednesday. The members informed the media that the PBC has already submitted its tax proposals for the federal budget 2011-12 to Finance Minister Dr Hafeez Shaikh on April 28, 2011. PBC, in its budget proposals, have demanded to the government to establish a Debt Management Authority in order to efficiently plan and mange the cost, maturity and winder distribution of govts debt, the members said. The members, while citing some studies on tax evasion, said that the government could generate an additional Rs300-400 billion in revenues within the present tax regime through better coverage and enforcement. Talking to media, Sohail Wajahat, member PBC said reforms are needed to address over-invoicing, misdeclaration and Afghan Transit Trade leakage issues. However, use of IT tools in customs can help in this regard. Similarly, gradual reduction in Custom duties on smuggling prone items will discourage these malpractices, he said. He further said the governments expenditures can be reduced by restructuring of Public Sector Enterprises that will staunch operating losses; by subsidy rationalisation and targeting subsidies to the poor only through Benazir Income Support Programme (BISP); better implementation and avoidance of waste in development projects. Meanwhile, a document prepared by the PBC showed that the provincial governments do have the necessary legislations in place to tax income on agriculture. The threshold levels, exemption limits should be reinforced, the collection machinery, compliance and enforcement measures strengthened. According to the document, urban immovable property tax in major cities can substantially augment the tax base of the local governments if a more realistic valuation is arrived at through periodic surveys and assessments. The document said public sector expenditures should be cut in ways that protect investment in infrastructure and social services. On of the ways to do so is to promote well-structured public-private partnerships in these sectors. Development of financial markets particularly the long-term debt market is another way to raise funding for large lumpy power, energy and transport projects, it stated.