The Pakistan Tehreek-e-Insaf (PTI) government could collect twice as much non-tax revenues as the tax amount as dividends from state-owned enterprises (SOEs), including the Oil and Gas Development Company Limited (OGDCL), the Pakistan Petroleum Limited (PPL), and the Pakistan State Oil (PSO).
This will be good news for the government that is desperately searching for alternative sources of revenue without having to hike or implement new taxes.
Express Tribune reported that the government can earn an additional amount of Rs. 34 billion to Rs. 64 billion in dividends from the SOEs in the next fiscal year starting 1 July 2021, with a policy of these companies paying 50 percent of the net income in dividends to their shareholders.
Many listed SOEs post hefty profits but the disbursement of the dividend is low. A low dividend is paid to keep cash in hand to cope with any financial trouble in the future. As the government is also one of the shareholders of these companies, the revenue it earns is also low.
The Head of Research at Arif Habib Limited (AHL), Tahir Abbas, wrote a letter to the Minister of Finance, Shaukat Tarin, suggesting budget proposals. He said that, for now, the SOEs are paying a relatively low cash dividend to the shareholders primarily due to the massive circular debt, which has proven to be a source of frequent liquidity crunches.
He remarked that if a healthy dividend is paid, it will benefit the government in terms of revenue collection and will improve investor confidence.
The letter read: “As per our calculations if we assume a modest 50 percent profit-after-tax payout ratio for all these entities, the non-tax revenue from the dividend income can amount to Rs. 65 billion for FY22, which is Rs. 34 billion higher than what is expected in FY21”.
The government may also earn even an extra Rs. 2.3 billion through withholding taxes.