LAHORE - The finance ministry is likely to set the FBR revenue target at Rs2.8 trillion in upcoming budget for 2014-15, an increase of 24 per cent from the estimated collection target of Rs2.27 trillion in 2014. Sources said that the government, as per commitment with the IMF, has decided to withdraw concessionary SROs in an effort to increase tax revenue.
“In the first phase, it will abolish these concessions by 0.4% of GDP (approximately Rs104 billion) in upcoming budget.” According to sources, the government may aim for 5.1% GDP growth in FY15 versus 4.1% in FY14. Total budget outlay for FY15 is estimated to be Rs3.86tr (13.2% of GDP), up 7% from estimated Rs3.6tr in FY14. It envisages controlling current expenditures to Rs3.29tr in FY15 from estimated Rs3.2tr in FY14.
They said the government will announce further 1% reduction in corporate tax rate to 33%. There is also a proposal to reduce turnover tax from current 1% to 0.5%. However, experts attach low probability of this happening, seeing ambitious revenue target. Government may impose some taxes on real estate like imposition of 2% WHT on purchase of real estate by non-filers.
Government may allocate Rs525b for PSDP, up 24% from Rs425b revised estimate for FY14.
Total revenues would be targeted at Rs3.9tr (Rs3.1tn tax revenues and Rs0.82tn non-tax revenues) versus revised estimates for Rs3.4tr in outgoing FY14. Federal Bureau of Revenue tax collection target is likely to stand at Rs2.8 trillion (10% of GDP), 24% higher that government revised estimate of Rs2.7 trillion for FY14.
Finance Ministry is likely to set fiscal deficit target at 4.8% of GDP (Rs1.4tr) in FY15 as against 5.7% (Rs1.5tr) of GDP in FY14, on the back of 13% higher revenues and meager 3% higher current expenditures. Noted economist Muhammad Sohail said that with a view to continuing reform process, budget FY15 is likely to focus on revenue generation by broadening tax net and withdrawing tax concessions. To broaden tax net, the authorities are also likely to impose more tax rate on non-filers of sales and income tax. In this regard, FBR could increase WHT rate on utility bills of non-NTN (National Tax Number) holders while WHT on cash withdrawal from banks may also be increased from 0.3% to 0.5% for non-filers. There are chances that FBR increase presumptive tax from 3.5% to 5% for importers and from 1% to 2% for exporters.
FBR proposed to imposed Special Excise Duty (SED) on import and local manufacturing of good at 1-2.5%. However, edible oil, POL products, gas, electricity, pharmaceuticals, fertilizers may remain exempted. There are high chances that government may increase Federal Excise Duty (FED) on cigarettes and cements while 6% non-adjustable FED on sugar is proposed. Overall standard FED rate may also be increased by 1% to 17%.
Financial expert Vahaj Ahmed said that seeing the recent rupee rebound, exports may not increase as it was expected at the time of GSP Plus status. However, he sees 7-8% rise in exports to $27-27.5 billon in FY15F versus $25.2b in FY14. On the other side, imports may range in US$44.3b in FY15 versus $42.3b in FY14, he added.