ISLAMABAD – Federal government has decided to impose strict measures tocontrol the budget deficit.
The government is planning to impose wealth tax on moveable assets tocontrol the country’s budget deficit, and this might raise custom dutieseven further on more than 5200 tariff lines.
According to the Finance Ministry, the current government aims to reduceimports to encourage in-house production and to help the local industrythrive. To do that, the current age limit of three years for cars and fiveyears for jeeps might get reduced to two years and three years respectively.
Other than that, over 900 items have also been considered for a regulatoryduty increment including mobile phones, and a number of other items. suchas cigarettes, might also see a price hike due to taxes in the coming days.
However, a potential wealth tax that is expected to be at a rate of 2 or 3percent on more than 5,200 tariff lines will make a much higher impact, asits estimated to generate more than Rs. 40 billion in tax revenue for thegovernment. The current custom duty on these tariffs stands at 20%, if thenew duty is added, the rate can go up to 23%.
The ministry says that these changes, if implemented, will reduce thebudget deficit from Rs. 2.3 trillion to Rs. 2 trillion. Taxes on vehiclesand other listed items are being increased mainly to contain theout-of-hand budget deficit that is a remnant of poor economic control,rising imports, and ineffective taxation in the past.——————————
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In order to curb this menace, the finance ministry is likely to impose anumber of different taxes. Other than tax increase, the government is alsoworking to cut costs on schemes and development programs started by theprevious government.
For example, the current budget for the approved Public Sector DevelopmentProgram of Rs. 800 billion can be brought down to Rs. 660 billion.Additionally, the ministry believes that revenue collection should be about0.7% of GDP at Rs. 260 billion.
To counter the massive budget deficit, income tax reliefs and rates mightalso be changed. The finance minister, according to sources, also proposedhalving the current limit of exempt income of Rs. 1.2 million. This can addRs. 75 billion to the total tax revenue, as more people become liable fortheir income.
