47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Executive Summarysector for foreign investors. The share of Oil andGas Exploration in total FDI during July-April2011-12 stood at 70 percent.Workers’s Remittances witnessed a stronggrowth of 25.8 percent in 2011 over the previousyear 2010. During July-April 2011-12, worker’sremittances grew by 20.2 percent at $ 10.9 billion.The buoyancy in remittances is largely attributedto the government’s efforts to divert remittancesfrom informal to formal channel. Data onremittances suggests that the monthly average forthe period of July-April 2011-12 stood at $ 1.09billion compared to $ 0.90 billion during thecorresponding period last year. The upsurge in theremittances is attributed to the government’sefforts of redirecting these flows from informal toformal channels.Fiscal Development: The Medium TermBudgetary Framework has improved the budgetpreparation process. Medium-term fiscalframework and budget policies have beenincorporated into a medium-term Budget StrategyPaper on rolling basis, which include medium-termindicative budget ceilings for the recurrent anddevelopment budgets, and provides an opportunityto discuss the budget between technical andpolitical levels prior to the presentation of theannual budget. The political level involvementincludes Cabinet, Standing Committees on Finance& Revenue, and political parties. The OutputBased Budget (OBB) has also beeninstitutionalized in the federal government whichpresents policies of the ministries in the shape ofgoals, outcomes, outputs and medium-termbudgets. The OBB also presents key performanceindicators for the outputs to introduce governmentwide monitoring system.18 th amendment in the Constitution of the IslamicRepublic of Pakistan was an historic step forwardabolishing the concurrent list transferringadditional functions to the Provinces. It wascombined with a path breaking 7 th NationalFinance Commission Award in 2010. In addition,the Government resolved long standing demandsof the Khyber Pakhtunkhwa relating to Net HydelProfit and Royalty and Gas DevelopmentSurcharge of Sindh and Balochistan. The awardalso acknowledged multiple criteria for transfer ofresources. Share of Balochistan has increased from5.1 to 9.0 percent. Likewise, Khyber Pakhtunkhwahas been assigned 1 percent of the total divisiblepool to mitigate the impact of campaign againstextremism. This has allowed transfer of 70 percentof the divisible pool to the provinces and FATAand Gilgit-Baltistan. During the last two years,Federal Government has transferred over Rs. 800billion additional over 2009-10 resource transfer ofRs. 633 billion. This should help the provinces toearmark more resources to social sectors anddevelopment of infrastructure.Government continued its efforts to broaden thetax base and simplifying the tax structure. Effortsare underway to move towards two main taxes, i.e.income tax and sales tax. As a result, SpecialExcise Duties and Regulatory Duties have beenabolished. A three years plan to phase out FederalExcise Duties is under implementation. CapitalGain Tax has been levied on sales of securities inthe stock exchange. Sales tax exemptions and zeroratings have been withdrawn on all items includingtextile, leather, fertilizer, pesticides, sports goodsand tractors except food items, health, educationand agriculture produce. The Government hasstrengthened automated e-filing and electronicpayment and refund system to ensure expeditioussettlement of refund claims expeditiously. For this,a centralized sales tax refund cheque issuancesystem is now operational in the Federal Board ofRevenue. Broadening the tax base identifyingpotential taxpayers has remained a key focus forwhich a dedicated unit has been established in theFBR. These efforts are now paying dividend.Federal Board of Revenue target for 2011-12 wasset at Rs. 1952 billion. During first ten months, taxcollection stood at Rs. 1,426.0 billion against Rs.1,149.8 billion in the comparable period of lastyear, showing an increase of 24 percent. It does notinclude Rs. 19 billion collected by Sindh provinceon GST on services.Efforts are being made to manage the fiscal deficitwithin acceptable level through an expendituremanagement strategy, austerity measures andreforms in public sector enterprises. Thegovernment is committed to simplification of taxregime, broadening the tax and mobilizingdomestic resources. The operational expenditure ofthe federal ministries was reduced by 20 percent. Aiii