Dawn-KP budget 2014-15

Progressive taxation of farm incomes

By Tahir Ali

Published Jun 23, 2014 06:11am

http://www.dawn.com/news/1114457/progressive-taxation-of-farm-incomes
The Rs404.8bn Khyber Pakhtunkhwa balanced budget for 2014-15, with a Rs139.8bn annual development programme, is aimed at addressing economic, social and industrial woes of the impoverished province, but falls short of business expectations.
“It is a status-quo budget devoid of any change, vision and reform agenda, and neglects the potential sectors. KP is beset with flight of capital, rising unemployment, terrorism and energy shortage. Joblessness is on the rise — there is 14.8pc unemployment in Khyber Pakhtunkhwa.
“Emergency steps are needed for economic growth, industrial revival, infrastructure development, energy supply, revival of sick industrial units and improvement in law and order and technical and IT education. But there is no proper roadmap for these areas.
“The government has failed to give new mineral, industrial, hydro, oil/gas and tourism policies reflective of its agenda for change,” says KP Chamber of Commerce and Industry President Zahidullah Shinwari.
The new budget is bigger by Rs69bn than the current budget of Rs344bn, while the ADP is higher by Rs21bn over this fiscal’s Rs118bn.
Major revenue receipts include Rs227.12bn from federal tax assignments, Rs12bn in net hydro profit, Rs32.27bn as NHP arrears, Rs29.26bn from oil/gas royalty, Rs27.29bn as war on terror grant and Rs35.35bn as foreign assistance etc.
KP’s own revenue receipts are estimated at Rs29bn (up by 70 per cent against the current year) and include Rs19.45bn in tax receipts and non-tax revenue of Rs9.3bn. This includes Rs12bn as GST on services. The province also earns Rs2.85bn from its own power plants.
The budget suggests insufficient measures to check the current expenditure which has reached around 70 per cent of the total budgeted outlay.
The finance minister promised to provide 15,000 more jobs in the public sector, but admitted that joblessness cannot be eliminated by the government alone. Without support of the private sector, and for that matter, economic growth, the problem cannot be solved.
There seems to be a genuine attempt to raise provincial revenues. The PTI-led KP government has proposed a progressive tax on agriculture income, as well as land tax and property tax. The KP revenue authority will conduct a proper survey to determine the property tax.
It intends to raise fees on stamp duty, professionals and professional institutions, business establishments etc. Strangely, a PTI-led government is to tax educational institutions, including medical, engineering and law colleges.
The finance minister says the province is replete with abundant human and natural resources, but its population is living in poverty and backwardness owing to unfair distribution of resources, flawed planning, joblessness, illiteracy, corruption, nepotism, weak accountability system and lack of good governance. He vowed to root out these evils.
Prepared under the ‘Integrated Development Strategy’, the budget aims at good governance, responsive social services delivery, economic prosperity, peace, economic growth and job creation, improved transparency and accountability, enhanced fiscal space and gender equity.
The minister said the private sector would be involved in the construction and maintenance of public sector development projects in partnership with the public sector.
However, important sectors have been allocated higher but yet paltry sums: Rs3.4bn for power sector against Rs1.4bn in the current year; Rs4.7bn against Rs3.28bn for irrigation and Rs1.58bn against Rs1.53bn for agriculture. Agriculture is the backbone of the economy as 70 per cent people in KP are dependent on it for their survival.
A Board of Investment and Trade has been formed to ensure an investment- friendly environment and for economic revival. The KP oil and gas authority has been constituted for better use of existing resources and for exploring new ones. But the impact of the two bodies is still not yet visible.
The finance minister says KP’s industrial sector is hit by lawlessness, energy crisis, limited market, high cost of production, dilapidated infrastructure and inadequate technical knowhow.
For this, technical education is to be promoted and has been allocated Rs3.7bn.
A self-reliance scheme with a Rs2.7bn rolling fund has been proposed to give interest- free loans of Rs50,000-200,000 to jobless youth.
He said the mineral sector could be used for poverty alleviation but earmarked only Rs0.62cbn for the sector.
The government intends to set up a stock exchange in Peshawar and is seeking support of the federal government in this regard.
Several austerity measures have been proposed to bring down expenditure. No treatment/training abroad, no new cars and no new posts are to be allowed unless approved by the chief minister. The construction of houses for officials and ministers on 20 marlas and 110 per cent raise in salaries of ministers, advisors etc. This is, however, being resented.
A sum of Rs7.9bn has been allocated for a pro-poor initiative under which various welfare programmes such as health insurance and provincial youth technical education etc will be launched. A Rs6bn special relief package programme for giving subsidised edible items to the poor has been proposed in the budget.
Various hydro and alternate energy projects being launched include the construction of 350 small dams.
Published in Dawn, Economic & Business, June 23rd, 2014

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ORIGINAL TEXT OF THE ARTICLE AS IT WAS SENT TO DAWN
KP budget 2014<br
By Tahir Ali
The Rs404.8bn Khyber Pakhtunkhwa balanced budget for 2014-15 with Rs139.8bn annual development programme addresses almost all the problems the province is faced with but gives only partial remedies to the economic, social and industrial woes of the impoverished province.
“The budget is a status-quo budget devoid of any change, vision and reform agenda and neglects the potential sectors. KP is beset with flight of capital, rising unemployment, terrorism and energy shortage. Joblessness is on the rise –there is 14.8 percent unemployment in Khyber Pakhtunkhwa against around 9.5 percent at national level. Province own revenues have remained stagnant. Real estate not taxed. Emergency steps were needed for economic growth, industrial revival, infrastructure development, energy supply, revival of sick industrial units, improvement in law and order, focus on technical and IT education but there is no proper roadmap for the areas. The government has failed to give a new mineral, industrial, hydel, oilg/gas and tourism policies reflective of its change agenda,” says the KP chamber of commerce and industry (Kpcci) president Zahidullah Shinwari.
Agonizing further is the fact that around 70 percent of the development funds lapsed in the current fiscal, he added.
The new budget is bigger by 69bn from the current year budget of Rs344bn while the ADP is higher by Rs21bn from this fiscal’s ADP of Rs118bn.
Major revenue receipts include Rs227.12bn federal tax assignments, Rs12bn net hydel profit plus Rs32.27bn as NHP arrears, Rs29.26bn oil/gas royalty, Rs27.29bn war on terror grant Rs35.35bn as foreign assistance besides some others sources.
KP’s own revenue receipts are estimated at Rs29bn (up by 70 per cent against the current year) include Rs19.45bn tax receipts and non tax receipts of Rs9.3bn. Rs12bn as GST on services which rose by 100 per cent is inclusive of tax receipts. The province also earns Rs2.85bn from own power plants.
The PORs target may be easily met in next fiscal and the years to come as new power plants get operational and sales tax collection targets is met for being easy,
Unlike other provinces, the budget has been divided into welfare, administrative and development sections but it is insignificant as welfare and administrative is the current budget having an outlay of Rs265bn while development budget is Rs139.8bn with Rs100bn local and Rs39bn foreign component.
The budget suggests insufficient measures to check current expenditure which has reached around 70 per cent of the total budget.
The expansion of the public sector must be a matter of concern for the subsequent government. The rising pay and pension bill of Rs176.5bn (66 percent of total current expenditure of Rs265bn) will squeeze space for development budget in future if not tackled. Industrialisation and Private sector
The finance minister promised to provide 15000 more jobs in public sector but he agreed that joblessness cannot be eliminated by government alone. Without support of private sector and for that matter economic growth, the problem couldn’t be achieved.
There seems to be a genuine attempt this time round to raise the provincial revenues locally and reduce dependence on federal and foreign funds. The PTI-led KP government has proposed a progressive tax on agriculture income, land tax and a progressive property tax.
KP has established KP revenue authority. This year a proper survey will be conducted to properly determine property tax.
It intends to raise the ratio of provincial taxes and fees on stamp duty, professionals and professional institutions, business establishments, agriculture income and salaries.
The rise in taxes/fees is expected to hit the consumers ultimately for it will be passed on to them. Strangely, a PTI-led government is to tax educational institutions including medical, engineering and law colleges.
The minister said KP is replete with abundant human and natural resources but its population is living under poverty and backwardness for unfair distribution of resources, flawed planning, joblessness, illiteracy, corruption, nepotism, weak accountability system and lack of good governance and vowed to root out these evils.
Prepared under the “Integrated Development Strategy”, the budget aims at good governance, responsive social services delivery, economic prosperity, peace, economic growth and job creation, improved transparency and accountability, enhanced fiscal space, gender equity and donor harmonization.
The minister said public private partnership act has been approved. The private sector would be involved in the construction and maintenance of public sector development projects.
Education has proved to be its biggest priority. However, important economic sectors have been allocated paltry sums: Rs3.4bn for power sector against Rs1.4bn in current year, Rs4.7bn against Rs3.28bn for irrigation and agriculture Rs1.58bn against Rs1.53bn in current year. The detailed expenditure report for the current year reveals that vital social and economic sectors of the ADP like social welfare, education, agriculture, energy/power and industries had been allocated Rs0.6bn, Rs24bn, Rs1.53bn, Rs2.2bn and Rs4.4bn respectively but actual utilisation remained at Rs.2bn, Rs3.72bn, Rs0.63bn, Rs0.65bn and Rs1bn could be utilised in this fiscal in that order.
Agriculture is the backbone of the economy as 70 per cent people in KP are dependent over it for their survival but only Rs1.5bn has been allocated for the sector. The poverty and inability of farmers to use enough quality inputs to raise their produce but the government comes up with only loans on easy terms for them.
A Board of investment and trade has been formed to ensure investment friendly environment and for economic revival. KP oil and gas authority has been constituted for better use of existing resources and to explore new ones but its impact is still not discernable.
To bring down poverty and accountability, the government has promulgated the right to information law and established a commission for access to information, access to services’ commission and conflict of interest commission, ihtesab commission, a complaint cell in CM secretariat. And a public procurement regulatory authority established to make the procurement system of hiring of services, goods and construction transparent and corruption free and introduced the market rate system instead of the composite scheduled rates to ensure transparency in development schemes.
The minister said KP industrial sector is hit by lawlessness, energy crisis, limited market, high cost of production, dilapidated infrastructure and lack of technical knowhow.
For this technical education is to be promoted which has been allocated Rs3.7bn. Technical University will be established.
Under the self-reliance scheme with a Rs2.7bn rolling fund has been proposed to give interest free loans of Rs50,000-200,000 to jobless youth on their personal guarantee.
He said the mineral sector could be used for poverty alleviation but then only allocated Rs0.62cbn in ADP for the sector.
The government intends to set up stock exchange in Peshawar to support the progress of industry and trade sectors and wishes the federal government to take further measures in this regard.
The government proposed ‘several austerity measures’ to bring down expenditure. No foreign treatment/training, no new cars and no posts to be allowed unless approved by CM. But he didn’t specify what happened to similar measures in the current budget. The minister said the government has formed committees for monetization and economy which are working with far reaching consequences, though he failed to identify any.
The construction of houses for officials and ministers on 20 marlas and 110 per cent raise in salaries of minister, advisors etc however is being resented.
Rs7.9bn has been allocated for a pro-poor initiative under which various welfare programs, such as health insurance, long-term loan for development of industries, and provincial youth technical education scheme etc would be launched. Rs6bn more allocated for a special relief package program for giving subsidized edible items to the poor.
Various hydel and alternate energy projects being launched. Rs7bn have been allocated to construct 350 small dams. 400 megawatts of electricity will be produced through gas whose cheap energy will be given to industries.

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About Tahir Ali Khan
I am an academic, freelance columnist, writer and a social worker.

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