Pakistan gets tough on taxes

Farmers with large incomes will pay tax for the first time

By Owen Bennett-Jones in Islamabad

The military government in Pakistan says it plans to ease the debt burden over the next 12 months by broadening the tax base.

Tax statistics

Population: 130m

Taxpayers: 1.8m

The budget speech was in the form of a televised address to the nation by the Finance Minister, Shaukat Aziz.

The military government in Pakistan has repeatedly said that its top priority is creating the conditions for an economic recovery in the country.

Finance Minister Shaukat Aziz said he was not going to increase taxes

The finance minister began by outlining the problems inherited by the military regime.

He said the main difficulty was Pakistan's very high levels of foreign debt which now stand at well over $30bn.

Tax evasion

He said the debt was not just a threat to the country's economy but also to its sovereignty as foreign economic agencies now have considerable power to influence government policies.

When it came to solutions to ease the debt burden and reduce the budget deficit, Shaukat Aziz focused on the government's plans to broaden the tax base.

He said that only 1.8m Pakistanis paid tax, in a country which has a total population of around 130m.

A trader listens to the budget speech on his radio

He planned, he said, not to increase taxes but rather to make sure that more people pay tax.

He said farmers with large incomes would in the future have to pay tax.

Currently no-one in the agriculture sector pays any income tax at all.

On the other hand, he said, that wealth tax would be abolished.

He also announced plans to accelerate the privatisation programme.

The revenues, he said, would go into debt retirement and poverty alleviation and the minister stressed the importance of addressing the trade deficit.

He said duties would be increased on some imports such as televisions and cars.