April 3, 2019 (MLN): Finance Minister Asad Umar while addressing his first ever press conference to be broadcasted live on Facebook, answered the many troubling questions on economy and industry in an attempt to clear the air regarding the government’s stance on a wide ranging issues.
Responding to a question on how he justifies the increase in petroleum prices while being a critic on the very issue during his time in opposition, he stressed that his government had at the time merely pointed that the percentage of tax applied on petroleum products (which stood at 52% at the time) was far more than what it should have been at the time. Comparing that to the percentage of tax applied by this government, that figure has been brought down to around 30%. In his words, if the government had opted to keep the same tax rates with respect to GST or pdl on petroleum and diesel products as those applied in April last year, his government would have collected Rs. 97 billion more in the last seven months of his government.
When asked about the introduction of a Tax Amnesty Scheme despite being a critic on the subject during his time in opposition, Mr. Umar acknowledged that the matter was a controversial one and that opposing views on the matter often face him. However, based on the recommendations received by him, he concluded that if such a scheme does come into effect, it would have to address certain conditions. First, it will have to address the issue of moral hazard where a person is certain that he will be able to avail an amnesty scheme sooner or later at a very low cost. Second, there need to be stricter repercussions towards choosing not to enroll within the tax net despite the opportunity to do so. And lastly, the option to evade the tax net after filing taxes once or twice only will have to be dealt with to ensure sustainable tax revenue creation.
While talking about how long would his policies take to reflect in the ground realities, he said that it would be a multi-stage process. At the moment, we remain in the survival stage, following which we would enter the stabilization period and only then would follow the growth phase. He said that the market was quite happy with the steps his government took in the January budget, and promised much better outcomes with the June budget.
He emphasized on the fact that his government was focused on targeting the growth of those sectors where the potential for job creation was high such as tourism and the IT sector, in line with the needs of an economy where a third of its population is still young.
On a concern raised regarding a bubble taking effect in the housing market where people transact in ‘files’ rather than on the development of real livable homes, he said that our economy remains devoid of proper regulations towards the long term home financing mortgage market, an area that his government would be working on a priority basis. He talked about reforming the Mortgage Refinance Company and also stressed on the importance of enacting foreclosure laws. In addition, he said that the banks will have to be incentivized towards the provision of financing for low-cost housing, small and medium enterprises and the agriculture sector.
When asked about the prospect and progress on the discovery of oil reserves, he said that the reason that a company like Exxon chose to step up its efforts in our country was the existence of the potential of a big finding. While it remains an expensive and high-risk venture, if a discovery is made, it will be huge. On progress, he stated that off-shore drilling needs to go on for at least 5000 meters beneath the sea level, of which 3500 meters had already been dug.
While taking about Sarmaya’s plans for PIA, he said that his government has created a new Cabinet Committee to elevate the public sector enterprises, a committee which would be chaired by the prime minister Imran Khan himself. Talking about the progress been made on Sarmaya, he said that the company has been incorporated, its Board of Directors elected and the first meeting conducted on Sunday with initial plans discussed. The prime minister would further be briefed tomorrow regarding the revival plans for both pia and Pakistan Steel Mills, with the ECC likely to endorse a revival plan in the month of April only.
On the matter of capital markets, he stressed that the larger goal should not be the level at which the index is performing but rather the number of Ipos taking place and the efficiency of capital mobilization which will drive growth for the economy in the long run.
On taxation, he said that for the first time ever, his government has produced working rules in the National Finance Commission on the ease of doing business to centralize the taxation system so that individuals are able to perform their related procedures in a single window.
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