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Non-tax revenue

The budget for 2013-14 envisaged 800 million dollars from the auction of 3G licence and another 800 million dollars pending payment from Etisalat for the privatisation of PTCL. Finance Minister Ishaq Dar admitted during the traditional post-budget briefing that these two non-tax revenue sources were included in the budgets for the past three to four years but maintained that the Nawaz Sharif-led government would succeed where the PPP-led coalition government had been unsuccessful. The award of 3G licence requires that statutory guidelines be observed and there is a process that cannot be hastened but nonetheless Dar’s commitment that the process would be completed within the forthcoming fiscal year is achievable.

However there is some out of the box thinking required to convince Etisalat to release the amount due given that the company is legally correct in insisting that the government of Pakistan mutates all the properties of PTCL, as agreed. In this context, it is relevant to note that the previous PPPP government, with exemplary relations with the United Arab Emirates as well as with Etisalat, explored all avenues to access this non-tax revenue, but failed. The major problem is that several remaining properties to be mutated are now privately-owned and in possession of the necessary legal paperwork and, therefore, it has been impossible for the federal government to compel them to vacate the land.

For Finance Minister Dar to succeed it is necessary to look at the possible reasons for his predecessor’s failure to reach a settlement with Etisalat. Reports at the time indicated that the PPPP government requested Etisalat to take properties still to be mutated from the total properties that were to be mutated and subtract the amount from the 800 million dollars due. Etisalat argued, again accurately, that the value of no two properties to be mutated was the same and in some instances there was massive divergence in the property’s acreage as well as its value based on its location and hence treating each property at par with the other was simply not financially feasible. One would advise Finance Minister Dar to take note of this position by Etisalat and explore other means to generate this source of non-tax revenue.

One possible way out of this long standing impasse would be for the federal government to initiate negotiations with Etisalat over a third party assessor who must proceed to evaluate each property that is yet to be mutated separately. True that the properties have since escalated in price considerably, however, without a market assessment of their value today it is doubtful if Etisalat would agree to hand over any of the remaining amount. In addition, Dar should agree with Etisalat that as and when any property becomes available for handing over to Etisalat it would release the withheld portion of that particular property.

It is critical for the government to generate the 1.6 billion dollars from these two non-tax revenue sources during the current year which would ensure that the unprecedented escalation in borrowing envisaged in the budget would not exceed budgeted estimates. As matters stand today Dar’s budget for 2013-14 envisaged 292.5 billion rupees as Domestic Permanent Debt (in contrast to the much lower current year’s 87.7 billion rupees) and a highly significant rise in revised estimates of treasury bills auction. Some of this amount, not identified in the budget, may be through anticipated sale of eurozone bonds which the PPP-led coalition government was unable to generate given the crisis in eurozone countries which, incidentally, has not abated. With such data it is difficult to reach the conclusion that the budget 2013-14 would reduce the budget deficit by 2.5 percent or indeed limit inflation to 8 percent.

Naqi Zafar, "Non-tax revenue," Business recorder. 2013-10-27.
Keywords: Economics , Economic system , Economic issues , Economic policy , Economic growth , PPPP government , Taxation , Privatization-PTCL , Inflation , Budget 2013-14 , Pakistan , UAE