LAHORE, Oct 27: The government intends to encourage the productive sectors – manufacturing, agriculture and trade -, eliminate all kinds of cross-subsidies, as well as expand the tax net by simplifying and rationalising the tax regime, Mr Shaukat Tareen, the Prime Minister’s adviser on finance, has said of his programmes to stabilise the worsening macroeconomic fundamentals and achieve sustainable economic growth.

Speaking to the businessmen from central Punjab and Lahore at the Planning and Development Department and the Lahore Chamber of Commerce and Industry on Monday, the adviser criticised the previous government’s policy of encouraging consumption-led growth and ignoring production sectors and said the most of difficulties facing the economy had resulted from those policies.

He said the government was committed to creating social safety networks for improving the lot of and protecting the poorer segments from price and other economic shocks, but that would not be done at the cost of the productive sectors of the economy.

“If the government feels that some people need its protection and support or if it wants to help a particular sector, it should do so from its pocket instead of putting the burden on you (the businessmen and traders) through cross subsidies,” the adviser added.

“We, for example, should have same power and gas tariff for everyone instead of having different tariffs for domestic consumers, industry and fertiliser makers,” he said as he promised to urgently address all the issues facing the manufacturing and trade to increase production and exports from the country.

Similarly, he said, he wanted to reduce the number of taxes. “There should be only two taxes, income tax and value added tax (VAT). Any individual who is earning money and any sector that is making profit should pay taxes. I don’t understand as to why we have turnover and such regressive taxes,” he said and promised to restructure the Federal Board of Revenue (FBR) and include the private sector representatives on it.

Mr Tareen said the government would consult all stakeholders while devising policies for different sectors of the economy and no decision would be made in isolation. “We want to restructure the productive sectors, revitalise and make manufacturing and agriculture profitable to increase exports and achieve sustainable economic growth. We will give incentives to the productive sectors to achieve this objective,” he said.

He said the banks had been asked to reduce their profits and provide cheaper loans (at Kibor plus 1-2 per cent spread instead of the current Kibor plus 4 per cent spread) to help the production sectors in these difficult times for the economy.

He said the government was facing the challenge of reducing the core inflation (exclusive of energy and food inflation) of 17 per cent to just five per cent in next six to nine months. “If we achieve this, the interest rates would automatically come down to single digit,” he added.

The adviser also spelt out the priorities of his government for the economic revival of the country, saying the areas of core concern have been clearly marked. He said in the past the policies were made in isolation and without proper consultation of stakeholders, but the present government would involve all the stakeholders in review process of policies to make them result-oriented.

He stressed the need of administrative

reforms saying that the administrative machinery is not as motivated as it should be. ”Though it is a difficult job but the government has decided to upgrade the administration.”

He said both the development and non-development expenditures should be curtailed so that the money could be use for the well-being of the country.

He said the government was determined to bring about economic turnaround after taking the business community and other stakeholders into confidence. He maintained that there was a solid base for robust growth and the government was taking appropriate steps for addressing the concerns of local and foreign investors.

He said the government was working on an integrated plan for stabilising the macroeconomic indicators, checking core inflation, bringing down fiscal deficit, improving revenue collection with simplification of tax collection system, promoting agriculture sector through a comprehensive package, putting in place an integrated energy plan, enhancing tax-to-GDP ratio, curtailing non-developmental expenditures, consolidation of the industry and strengthening of capital market.

He said that Planning Commission was being strengthened, as the government wanted to strengthen the institutional framework so that things could be streamlined and effective planning in consultation with the stakeholders could be made.

Mr Tareen said there were some serious issues confronted to the country’s economy for which the government was paying due attention while the business community also needed to ponder on these issues.

He said that poverty level in the country had gone up from 12 per cent to 28 per cent since 2005. He said the government was committed to addressing problems of those living below the poverty line by fulfilling their food requirements, apart from providing them proper health, education and other facilities.

He said: “Our industry needs consolidation to meet the new challenges’’. He also floated the idea of a Resolution Trust Corporation (RTC) whose affairs must be regulated through the private sector and the government would restrict on extending funds to it.

He also said the industrialists could benefit from bond market, which must be introduced.