‘Rupee devaluation to help ease external pressure’

KARACHI: Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan on Monday said a recent over four present depreciation in rupee value would help in addressing balance of payment crisis.

“It was necessary to reduce the ballooning current account deficit,” Khan said, addressing a pre-budget seminar 2018/19. Pakistan Businessmen and Intellectual Forum hosted the event.

The official foreign exchange reserves maintained by the State Bank of Pakistan declined to $12 billion from $19 billion due to widening current account deficit, Khan added.

Exchange rates were stable during the past three years, which helped in maintaining lower inflation and policy rates. “But the higher imports compelled the government to allow devaluation in local currency.”

On rising imports during the past couple of years, the Prime Minister Assistant said the government reduced customs tariff to four slabs from seven slabs. The economy was import based and cheap imported raw material failed to boost the exports.

Khan said free trade agreements (FTAs) benefited the country’s economy in the past, but incentives granted under these agreements need revision. “We need to protect local manufacturers and incentives under FTAs should be granted to products that are not produced locally,” he added.

He said there will be no adverse impact of rupee devaluation. On amnesty scheme for undocumented offshore assets of Pakistanis, he said it is difficult to park money in foreign countries. “If the economy receives $6 billion under the amnesty then it would not only support the balance of payment but also contribute to the national economy.”

Khan said the prime minister is likely to announce the amnesty scheme before the announcement of federal budget scheduled on April 27.

The PM assistant further said single digit sales tax would not be possible till the sales tax collection is ensured at retail stage. He, however, assured the business community of reviewing taxes including super tax, tax on bonus shares and tax on dividends. “If taxes on these heads are rationalised then the revenue impact will have to be transferred to other heads,” he added.

Khan said the government is serious in enhancing threshold for individuals for calculating income tax. “If threshold is increased then there would be problems of reduction in number of return filers.”

He, defending the corporate tax rate at 30 percent, said other countries also levy corporate earnings. “Pakistan has no gift tax and no wealth tax. In fact the agriculture having share of 29 percent of the GDP is exempted from income tax.”

Khan said Pakistan achieved tax to GDP ratio of 12.5 percent from nine percent four years ago due to efforts of tax officials.

On regulatory duty, he said the measure helped the authority collect Rs80-90 billion in a month.

The government will make legislation to replace existing flaws in order to continue the regulatory duty regime. He advised the business community to ensure tax compliance and help in discouraging tax evasion.