The Pakistan Tehreek-e-Insaf (PTI) government has reiterated time and again that the country is going through economic turmoil and the leadership is determined to pull the country out of this crisis even if it has to take tough decisions.
Following the gloomy indicators that emerged in the Pakistan Economic Survey for the outgoing fiscal year, the country braces itself for what could be the most austere budget in history.Minister of State for Revenue Hammad Azhar presented Budget 2019-20. “There has been no increase in exports in the last five years. The circular debt has peaked to Rs1,200 billion – it is increasing by Rs38 billion per month.”
Azhar said the country witnesses a $20-billion current account deficit while the trade deficit touched $32 billion in the outgoing fiscal year. “The economy has deteriorated due to expensive imports and subsidised exports.”
The minister explained that heavy borrowing was done to keep rupee at a higher level, which could not be sustained for long. Consequently, the rupee depreciated in December 2017 and the economic growth slowed resultantly.
Azhar then went on to outline measures taken by the Imran Khan-led government to sustain the economy. “We reduced trade deficit while remittances saw an increase of $2 billion. The current account deficit dropped by $4 billion.”
“We borrowed a total of $9.2 billion from China, Kingdom of Saudi Arabia, and the United Arab Emirates.”
Azhar said the government gave more autonomy to the State Bank of Pakistan. “We created the Single Treasury Account, launched the Billion Tree Tsunami project. We made Federally Administered Tribal Areas part of Khyber-Pakhtunkhwa.”
“Keeping in view that the tax-to-gross domestic product (GDP) ratio is significantly lower in the region, our focus is on increasing tax collection. Only two million people, including the salaried class, paid taxes. Currently, there are at least 3.1 million registered commercial customers, out of which only 1.4 million are tax-return filers. Similarly, there are 50-million bank accounts in the country but only 10% of them are taxpayers.”
The Federal Board of Revenue has set a tax-collection target of Rs5.5 trillion for the next fiscal year. “Given the economic situation, the tax-to-GDP ratio needs to be maintained at 30%. It will touch 12.6% due to the target set by the FBR. A reduction in tax exemption will increase revenue.”
The Asset Declaration Ordinance 2019 will allow undeclared assets to be entered into the economy. The computerised tax paying system will streamline the process as it will also lessen the cost of tax compliance.
“The government is maintaining a centralised treasury account at the SBP to deposit government funds.” He added that the federal and provincial governments will not be allowed to park their deposits at any commercial bank. The move is to curtail money laundering.
The government will not be borrowing from the central bank to tackle budget deficit as it fuels inflation. Azhar underscored that the government’s aim was to shift the burden from the common man. A total of Rs1,800 billion has been allocated for national development while Rs950 billion was set aside for federal development budget.
Azhar stressed that there will be no compromise on the efficiency of the armed forces – their budget remains unchanged from last fiscal year at Rs1,150 billion.
Ehsaas Programme: A new ration scheme will be introduced that will offer 80,000 people interest-free loans every month. An old-age home scheme will be launched for senior citizens. The government will launch a ration card scheme for one million people.
Sehat Sahulat Progamme: 3.2 million families to be inducted in the first phase.
Higher Education :The government has allocated Rs43 billion for higher education.
Water Resources: Rs20 billion and Rs15 billion have been allocated to buy land for the Diamer-Bhasha, and Mohmand dams respectively.Azhar said Rs80 billion had been recovered through curbing load-shedding on feeders. He added that efforts will be made to curtail power theft. The government has set aside Rs80 billion for the energy sector.
For the newly merged tribal districts, the government has set aside Rs152 billion. Another Rs35.5 billion has been set aside for a total of nine projects in Karachi.
Rs3,255 billion will be transferred to the provinces under the seventh NFC award – it is 32% higher compared to last year’s Rs2,465 billion.
Agriculture: Rs.280 billion have been allocated for agriculture sector to make country self-sufficient in grain, pulses and edible oil.
Salaries and wages: The minimum wage has been increased to Rs17,500. The government has increased basic pay of Grade 1 to 16 employees by 10% with an ad hoc allowance increase of 10%. The basic pay of Grade 17 to 20 employees has been increased by 5% and ad hoc allowance by 5%. Azhar said the Grade 21 and 22 officers have agreed against an increase in basic pay owing to the current economic situation. The net pensions have been increased by 10%.
Meanwhile, the PTI government has cut salaries of members of the National Assembly (MNAs) by 10%.
General sales tax: The general sales tax (GST) remains stagnant at 17%. However, import duty on luxury items has been increased. The sales tax on restaurants and bakeries has been reduced to 4.5%. The government has proposed to remove 3% of value-added tax on mobile phones.
Sales tax on sugar, fish, meat, and chicken has been increased to 17%, while GST remains stagnant at 17% on gold and silver jewellery.
Customs tax: The government has reduced customs duty on raw material, on steel for razor business it has gone down from 11% to 5%. The government has also proposed duty exemption on hydro crackers. The customs duty on basic medical products has been waived by 3%. The duties on liquefied natural gas (LNG) have been reduced from 7% to 5%. Raw material for paper will be exempted from duty.
Property can't be registered in the name of nonfilers
- Property can't be registered in the name of nonfilers.
- Those who will provide jobs to new graduates will be given tax rebates; those passing out after 2017 to be considered as new graduates
- Rs1.2mn was legal limit for income tax exemption — it will be reduced to Rs0.6mn for salaried persons and Rs0.4mn for others
- The loophole of income declared as gifts will he closed as such gifts will be treated as income from other sources.
- Super tax to be imposed on those with income above Rs0.5bn.
- Withholding tax to be imposed on purchase of properties irrespective of the value of the property
Tax on services to be introduced
- Tax on marble to be increased to 17pc
- Tax on services to be introduced
- Tax on sugary beverages to be increased to 13pc
- Edible oil taxation to Rs40 per kg; FED on it to be increased
- 17pc sales tax on ghee, oil etc
- Rs2 per kg on cement
- ON CARS: FED not only on 1700c and above, but 2.5pc upto 1000cc, 7.5 on more than 2000cc
- Rs5,200 tax per one thousand cig sticks, Rs117bn target of revenue from this measure
- Refund bonds: FBR will settle tax refunds by issuing promissory notes
- Active tax payer list issue will be resolved
Taxation on CNG to be increased
- Cotton etc will be slapped with 10pc tax
- Taxation on CNG to be increased
- Sugar now taxed at 8pc and Rs18bn revenue is obtained from it, it is advised to increase to 17pc
- Cottage industry: new definition is advised to include only those industries earning less than Rs2 million turnover per annum
Federal excise duty on cars
The minister for revenue says that the budget recommends that cars of upto 1000 CC see a federal excise duty of 2.5 per cent.
It is further recommended that cars which are more than 2000CC in capacity see a federal excise duty of 7.5pc imposedFacebook Count
Increase in federal excise duty on cigarattes advised
Hammad Azhar announces that the budget recommends a federal excise duty of Rs5,200 on every 10,000 cigarettes be imposed.
Duties will be reduced to boost non-traditional exports
- To boost non-traditional exports like wooden furniture, duties will be reduced
- To save Pakistan's forests while safeguarding the furniture industry, duty on imported wood will be reduced from 100pc to 3pc
- Steel duties will also be reduced to 5pc to help razor exporters
- Duties will also be reduced on several domestic goods, printing and solar panels and chemical industry
- Hydrocracker plant machinery to also be exempted from duty
- Medicinal ingredients will be given a 3pc import duty exemption
Textile machinery and parts will be exempt from duties
- Textile machinery and parts will be exempt from duties. Duty will also be lowered on flexible fibers and non-woven materials
- Paper scrap and pulp will be exempted from custom duty as paper is an important input in the educational sector
- On different types of paper, duty to be reduced from 20pc to 16pc. This will bring down prices of paper and books, and printing presses will get a boost
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Sugar tax advised to be increased to 17pc
Sugar prices are likely to go up as it has been recommended that the sales tax, which previously stood at 8.5 per cent, now be increased to 17 per cent.
Sugary drinks will also see an increased tax duty of 13.2 pc versus the previous figure of 11.25 pc.Facebook Count
- Tax to GDP ratio is 12pc right now — among lowest in world. Will be brought to 20pc
- Agenda for tax reform created that will give macroeconomic stability and help future generations
- This agenda is part of the government's medium term policy framework
- The government has been foregoing Rs972.4bn in tax breaks to different sectors
- Likewise, the present customs duty regime is losing the country Rs20bn in annual revenue
- Govt giving final shape to a corrective customs tariff that will be implemented phase wise
