ISLAMABAD Pakistans annual development budget for the financial year 2009-10 will face a cut of nearly Rs 100 billion due to the subsidy being provided on electricity and the war on terror. In addition to Rs 55 billion of the subsidy cost, the spending on the war on terror beyond budgeted estimates would also be financed by a cut on the Public Sector Development Programme (PSDP), Finance Shaukat Tarin told journalists after a press conference. According to the Finance Minister, the US assistance funds have started pouring in. The more funds we get from the US, the less we need to cut the development budget, he added. However, he ruled out any need yet to impose new taxes to meet the revenue target. Earlier, while addressing the press conference on Monday, Minister for Finance Shaukat Tarin said the Federal Government would bear all expenditures being incurred on war against terrorism. According to the Finance Minister, as much as Rs 750 billion have been draining down due to bleeding state entities and leakages in the tax administration. Referring to mainly power sector entities, the Finance Minister said a sum of Rs 200-250 billions go in vain to stop bleeding of state entities besides a leakage at the tax collection stage amounts to Rs 500 billion. According to Tarin, organisations like Pakistan Railways, Pakistan International Airline, Pakistan Steel Mills and electricity distribution companies (DISCOs) have been inflicting heavy losses on the national exchequer, which would be removed. Since the press conference was aimed at briefing the media on the 7th NFC Award, he said it would strengthen the provinces financially and create new opportunities for generating additional revenues. He urged the provinces to enhance their capacity to spend, as they would be getting additional funds under the new Award that would be applicable onward July 1, 2010. The Finance Minister also hinted at abolition of certain ministries and divisions from the Federal Government. There is no need to those ministries like Health and Education at the Centre, as these are the provincial subjects, he said. To a question, he said the government would carry out a thorough restructuring exercise to identify the deadwood. Anxious to bring the agriculture sector into the tax net, Tarin said that agriculture was sharing 22-23 percent in countrys Gross Domestic Product (GDP), however its share in taxes was negligible. He also stressed the need for levying taxes on real estate, services sector, and capital gain tax on stock exchange to broaden the tax base. The government has set the target of 13.9 percent of GDP tax collection, he added. Answering question about the Value Added Tax (VAT), he said it would be implemented from next financial year as a refined form of the General Sales Tax. It is already decided with the provinces that the Federal Government would collect the VAT on goods while the it would their discretions either to collect themselves on services or ask the Centre to collect for them. According to the Finance Minister, President Asif Ali Zardari and Prime Minister Syed Yousuf Raza Gilani gave him a free hand in decisions during the NFC meetings. He added that he also decided to hold meetings of the 7th NFC at all the four provincial headquarters to remove irritants of the provinces. Tarin said that Federal Government recognised the need of the provinces for a larger share in the divisible pool since provinces are assigned the task of provision of basic services like health, education, water supply and sanitation. He said that NFC recognised that sales tax on services is a provincial subject under the Constitution. He added that Federal Government and all the four provinces recognise the role of NWFP as a frontline state in the war on terror. The Federal Government has reiterated its commitment to bear all expenditures being incurred on the war on terror. However, as a gesture of support by all provinces and the Federation, 1 percent of the total divisible pool has been earmarked for NWFP as an additional resource for war on terror during the Award period. This, he said, would be equivalent to 1.83 percent of the provincial pool. Regarding vertical distribution, he said that provincial share of the divisible pool will increase from the present 47.5 percent to 56 percent in the first year of NFC and 57.5 percent in the remaining years of the Award.