KARACHI: The Sindh government has set the target for provincial tax collection at Rs154 billion for 2016-17, up 24 percent from the budget estimate of the current fiscal year.
Sindh Finance Minister Syed Murad Ali Shah, in his budget speech, announced Rs7.7 billion direct taxes, which are less than 7 per of the total provincial tax receipts of Rs125.2 billion for 2015-16.
According to the budget documents, tax and non-tax receipts are estimated to contribute only 22.8% of the total general revenue receipts amounting to Rs727.1 billion for 2016-17. This means the Sindh government finds itself largely dependent on federal transfers and grants that constitute more than 77% of the total general revenue receipts for the next fiscal year.
Non-tax revenues are expected to be Rs12 billion in 2016-17 as opposed to tax receipts amounting to Rs154 billion, budget documents show.
The agriculture sector is expected to generate only Rs650 million in taxes in 2016-17. This amount is only 6% of total direct taxes that Sindh is expected to generate in the next fiscal year. The tax on agriculture income will be just 0.4% of the total direct and indirect provincial tax collection in 2016-17.
According to the revised budget estimate, the tax on agriculture income will equal just Rs350 million in 2015-16. This is considerably lower than the non-tax receipts of Rs559 million that the Sindh government is expecting to receive in the same year through fees drawn by the government’s educational institutes, including secondary and intermediate schools, technical colleges and universities.
Furthermore, the estimates of expenditures reveal that the government is expected to give agriculture subsidies, which exclude administration expenses, amounting to a staggering Rs8.7 billion in 2015-16, up 106% from 2014-15.
With heavy subsidies and near absence of taxation on the agriculture income, no wonder the provincial government is going to rely on indirect taxation by means of sales tax on services (Rs78 billion), provincial excise tax (Rs4.8 billion), stamps duty (Rs9.5 billion) and motor vehicle taxes (Rs6 billion) in 2016-17.
The provincial minister said the standard rate of the Sindh sales tax will be reduced from 14% to 13% for 2016-17. He also announced the imposition of sales tax on chartered flights services, consultancy services, public relation services, visa processing services, debt collection services and supply chain management services.
