Pakistan budget targets big rise in tax revenues

ISLAMABAD: Pakistan is targeting a 16 percent rise in tax revenues to 3.95 trillion rupees ($37.8 billion) in the year ending June 2017, Finance Minister Ishaq Dar said as he unveiled a budget aimed at shoring up the South Asian country’s finances.

Dar said Pakistan would target a fiscal deficit of 3.8 percent of gross domestic product for the coming financial year, down from the 4.3 percent envisaged for this year.
Pakistan’s economy is growing at its quickest rate in eight years after a slide in oil prices and expansion in industry and services boosted demand. Investor confidence has slowly returned to a country that was battered by the global financial crisis.
“The dangers to the economy are now far behind us. Economic growth has hit an eight year high. This would have been even better if it had not been for a 28 percent fall in the cotton crop,” Dar told parliament.
Still, the economy remains structurally weak, hamstrung by poor infrastructure, the threat of militant violence and a very narrow tax base.
The GDP growth rate of 4.7 percent in the year to June 2016 was less than the government’s 5.5 percent target, and a contraction in the agricultural sector this year meant many Pakistanis do not feel much better off.
Dar said the government’s priority in the year ahead was to push Pakistan’s persistently low tax-to-GDP ratio to above 10 percent and raise revenues from taxation. Pakistan’s financial year runs from July to June.
Successive governments have promised to rein in tax evaders and boost revenues but face fierce resistance to change, including from the many politicians and businessmen believed to be among those dodging their taxes.
The low level of collection and the hefty cost of funding its military has left Pakistan with insufficient money to spend on modernizing its schools and hospitals, to the dismay of donors who end up financing much of the social infrastructure.
Dar said total spending for the 2016/17 year was estimated at 5.08 trillion rupees, while the defense budget would rise 11 percent year-on-year to 860 billion rupees.