ISLAMABAD: The government has decided to impose 5 per cent tax on monetised transport facility of senior government officers, unlike private salaried class whose salary, perks and allowances are subject to up to 20 per cent of income tax.

A senior government official told Dawn on Monday that the ministry of finance had reviewed up to 95 per cent of taxation proposals on the basis of directives of the political leadership to announce a ‘people-friendly’ budget, adding that some downward revision in tax target might be required.

He said the Federal Board of Revenue had been asked to examine the impact of the review of taxation proposals and suggest how much reduction in the revenue target was required. He said the finance ministry and the FBR had originally worked out the revenue target for next year at Rs2.338 trillion which might now be reduced by up to Rs5 billion to slightly over Rs2.330 trillion.

The FBR was directed to see if the required reduction in tax collection could be adjusted against improved administrative measures so that a sustainable revenue target could be announced.

The official said a reduction in the revenue target was necessary in view of prime minister’s directives to provide relief to the agriculture sector and the common man.

Another official said the government was also likely to do away with the federal excise duty on cement as an incentive to the construction industry.

Sources said the government had decided to impose only 5 per cent tax on the compensation granted to Grade 20-22 officers against withdrawal of their official transport facility. The government had allowed a monthly compensation of Rs65,000 to Rs82,000 to the officers with effect from Jan 1, 2012, in lieu of official cars.

Under the existing income tax rules, private sector employees’ salaries, allowances, bonuses and other remunerations are subject to 15-20 per cent income tax depending on the income slabs. But for government officers, the finance ministry is proposing only 5 per cent tax arguing that monetisation of transport facility was not an allowance but a replacement of existing facility which should be taxed at a flat rate of five per cent.

An official statement said the monetisation policy had resulted in a saving of about Rs1.5 billion during the current financial year. The public sector corporations also demanded to adopt the policy. “The government is considering to extend the policy of car monetisation allowance of other officers and ranks of various categories.”

A government official said the proposed monetisation of housing facility for government officers had been postponed for the current year because it required more examination.

He said a detailed examination of reduction in the number of income tax slabs proposed by the FBR suggested that taxation would be higher for most of the salaried persons as those earning over Rs120,000 a month would be liable to a fixed tax plus certain percentage of total income.

Responding to a question about reports in the electronic media that the announcement of the federal budget might be delayed for a week, a senior official told journalists that there was no such possibility. The budget would be presented before the National Assembly on June 1, he added.

Officials said the prime minister was informed by the economic managers led by Finance Minister Dr Abdul Hafeez Shaikh that the restructuring process of the loss-making public sector enterprises would be accelerated and tariff would be rationalised in the budget.

The officials said next year’s target for inflation had been set at 10.5 per cent and of budget deficit at 4.2 per cent of GDP. The public debt is estimated to hover around 56.7 per cent of GDP compared with the 59.6 per cent revised estimate for the current year that was originally set at 56.7 per cent.

The remittances from overseas Pakistanis have been estimated at $14.1 billion the next year compared with $13.2 billion for the current year.

The officials said the prime minister was informed that consolidation of macroeconomic stability, acceleration of growth and employment, continued fiscal austerity and strengthening of the targeted social protection would be the hallmarks of the next year budgetary policy.