LAHORE: The government, with its steadfast approach has identified tax evaders by levying withholding tax on cash withdrawal from banks and speeded up industrial activities by importing RLNG.
The withholding tax regime was severely criticised and later the tax amnesty scheme for traders also came under fire. It is true the number of new taxpayers added after the amnesty scheme is dismally low and the deductions made on cash withdrawals have added more revenue. But, in the process, the government documented the evidence of at least 500,000 account holders, mostly traders who withdrew cash above Rs50,000 in one day.
It was naïve to infer the withholding tax was imposed to collect more revenues. It was not a new measure, but the tax deduction was restricted to 0.1-0.2 percent. This time the rate was increased to 0.6 percent. This high deduction rate was likely to force the traders to come into the tax net.
However, in order to give the traders some time, the rate was reduced to 0.3 percent along with amnesty on tax registration. This concession was announced as a prudent measure to further document the over 50 percent of the undocumented economy.
The wiser elements took cue and registered in the tax net. However, a majority took this trader specific amnesty like the previous schemes when those that did not avail the facility were not confronted. But this time the government continued collecting the evidence of their cash transactions through deduction of 0.6-0.3 percent by the banks.
The banks are bound to deposit this tax in the national exchequer along with the National Identity Card Number of each account holder. These tax evaders may not have a national tax number but they could be identified through their CNIC numbers. So the government now has documented record of tax evaders, and soon they will get notices from the Federal Board of Revenue. The data if used prudently would help the government in increasing the tax to GDP ratio. Similarly, the government was severely criticised for rushing through the RLNG deal. It remained steadfast. The petroleum minister in fact challenged the opponents to take him to NAB or courts.
Pakistan got cheaper LNG from Qatar than India that is the larger buyer, and as a result, the price of RLNG is lower than even the domestically produced natural gas.
This turned out to be beneficial for the manufacturing sector of Pakistan, although for now RLNG is being supplied only to the textile sector, but the summer gas that other industries shared with textiles, is now available in large quantity to the non-textile sectors.
The textile sector in Punjab is getting 24/7 gas against the maximum 6 hours during this time of the year in 2015. The non-textile sector that received only 4 hours supply during March 2015 is now getting gas for 16 hours. This has reduced the cost of power of the industries by almost 50 percent and brought the power and energy cost of Punjab based industries at par with other provinces.
Another positive impact is the availability of the 1,500MW of energy, which was earlier used by the industries, for the domestic consumers. Since supplies of RLNG are assured for 15 years this 1,500MW would reduce domestic load shedding during summer.
Not only are closed spinning mills reviving because of cheaper power generation, but those located near the SNGPL pipeline have been assured of gas supplies after they complete the formalities. Another positive is the lower cost of furnace oil which will help produce cheaper power compared to natural gas for industries owning furnace oil generators. This will reduce the gas load, even in Sindh and Khyber Pakhtunkhwa.
The industrial activities are on upswing raising the hopes of higher growth in the manufacturing sector in the last quarter of this fiscal. Employment situation is improving too, though worker productivity still needs to be improved.
