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Pakistan announces new economic package
ISLAMABAD. Mar 28: In a move to try to revive Pakistan's ailing economy, Finance Minister Sartaj Aziz announced a bold new economic package Friday that will see more people pay taxes, but at a lower rate, reports AP.
It also slashed customs duties in a bid to increase exports and substantially curb smuggling. an economic curse that has crippled previous attempts to jump start the country's shattered economy.
It reduced the general sales tax to bring prices down, something cash-strapped Pakistanis have been demanding.
In a televised address to Parliament Aziz said only 800.000 Pakistanis pay taxes, that in a country of 140 million people.
From now on he said anyone who owns property, or a vehicle or has travelled abroad or even has a telephone will now have to file an income tax return.
"The driving philosophy of our taxation reforms is to reduce tax rates and broaden the tax base to the hitherto untaxed or undertaxed sectors." said Aziz.
The government will require anyone making 30.000 rupees (800 dollars) a year or more to file a tax return.
Previously taxes were paid only after the annual earning reached 60.000 rupees (1.460 dollars) a year.
But instead of paying a flat 10 per cent of their income in taxes, they will pay five per cent. The flat tax rate increases as salaries increase, with the maximum tax bracket of 300.000 rupees (7,300 dollar) or more, paying out 20 per cent of their income.
Previously these high income earners paid out 35 per cent in taxes.
The hope, said Aziz, is to encourage people to pay their taxes.
The reduction, he said "will promote voluntary compliance on the part of taxpayers and reduce tax evasion and corruption."
As well Pakistan will charge no more than 45 per cent custom duty, down from a previous high of 65 per cent. The minimum custom duty has been lowered to 5 per cent from a previous high of 13 per cent.
This Aziz told Parliament is an attempt to curb smuggling, which annually costs the exchequer billions of rupees.
Most of the smuggled goods arrive in Pakistan from neighboring Afghanistan. Landlocked Afghanistan has a free transit trade agreement with Pakistan which allows it to bring goods into the Arabian Sea port at Karachi and transport it free across country to Afghanistan.
However, smugglers on the Afghan side of the Border reload the goods onto camel caravans and trudge across the porous border back .to Pakistan where the goods are sold in markets known locally as "smugglers bazaars."
The general sales tax which the previous government of Benazir Bhutto increased to 18 per cent was slashed to 12.5 per cent by Aziz.
He said it will go far to reducing the cost of goods to the poor. It will also be expanded to include retail sector, which Aziz said has "remained largely undertaxed."
In what Aziz hailed as a "major incentive" to boost investment the government has exempted both imported and domestically manufactured plant has machinery from the general sales tax.
He anticipated this would reduce the up-front investment cost of projects by as much as 25 to 30 per cent.