Friday June 10, 2022

Pakistan’s new government unveils Rs9.5 trillion budget

Pakistan’s new government   unveils Rs9.5 trillion budget

Finance Minister Miftah Ismail presents the annual budget 2022-23 at the National Assembly in Islamabad on Friday. AFP

By Tariq Butt

Finance Minister Miftah Ismail on Friday unveiled the coalition government’s maiden budget with an outlay of Rs9.5 trillion for the fiscal year 2021-22 in the National Assembly.

Fifteen per cent increase in government servants’ salary was introduced while the adhoc relief given to them earlier was merged in their salaries. A five per cent in the civil servants’ pensions was made. Three million laptops will be provided to young men at cheap rates.

The budget will provide relief to the middle class as the government has decided to increase the income tax ceiling on the salaried class from Rs600,000 to 1.2 million per annum. Ismail said that despite several hurdles in the country, Rs65 billion has been earmarked for the Higher Education Commission (HEC).

An amount of Rs1,523 billion was allocated to defence while the development budget was earmarked Rs808 billion. A sum of Rs3,950 billion was allotted to payment of interest on loans.

Due to the inflation, households earning less than Rs40,000 will be compensated by the government in addition to a significant increase in the funding for Benazir Income Support Program (BISP). BISP scholarship is being extended to 10 million students.

Similarly, the government has also decided to give tax breaks to IT, agriculture, clean energy, and education sectors. In this budget, it has been proposed to waive sales tax on the import and distribution of solar panels to boost clean energy. The agriculture machinery, including tractors, along with seeds, will also be exempted from tax.

Agriculture machinery would be exempted from customs duty; greenhouse farming, drip irrigation, and water supply would be exempted from tax. The government also plans to “shift wealth from rich to poor” through higher taxes on non-productive assets, such as real estate.

“Introduction of tax on non-productive assets of the rich is proposed so that a balance is created which would directly impact the property prices making them cheaper for the lower economic classes. A tax of 5 per cent will be imposed on the second property worth 2.5 crore,” it added.

In order to boost industrial growth, the government decided to exempt industrial feeders from power outages. It also raised the minimum tax bracket from Rs4 lakh to Rs6 lakhs for small businesses.

The fixed income and sales tax regimes would also be introduced starting from Rs3,000 and less than Rs10,000 after that the FBR will not ask them for further taxes.

Taxable profits limit on saving certificates, pensioner benefits, martyrs’ family welfare account investments is being reduced from 10 per cent to 5 per cent.

The government would increase tax on cars above 1600CC as well. It has allocated Rs10 billion to mitigate the impacts of climate change.

At least Rs 24 billion have been set aside for vaccination, disease control and capacity building of the health institutions. Moreover, pharmaceutical ingredients and basic raw materials used in the manufacturing of various kinds of medicines are exempted from customs tax.

The minister revealed that the Federal Board of Revenue’s (FBR) target for the next fiscal year was 9% - Rs7,400 billion - while the provinces will be asked to collect Rs4,100 billion.

The federal government’s net revenue is projected to be Rs4,904 billion, non-tax revenue will be Rs2,000 billion, and the expenditure is expected to be around Rs9,502 billion for the next fiscal year, Ismail said.

Pakistan will also spend Rs3,950 for debt servicing, the finance minister told the house, adding that the tax imposed on non-filers has been proposed to be hiked from 100% to 200%.

The total expenditure for interest payments during the current fiscal year has been estimated at Rs3,144 billion - including Rs2,770 domestic and Rs373 international - while for the next year, it will climb to Rs3,950.

The total expenditure of the federal government for the current fiscal year is expected to clock in at Rs9,118 billion, the Public Sector Development Programme (PSDP) at Rs550 billion, while Pakistan will spend Rs3,144 billion on debt servicing, Ismail said.

He proposed increasing the rate of advance tax on purchase and sale for filers from 1% to 2%, while for non-filers, the tax rate for purchasing property will be at 5%.

The minister said if a person has an immovable property of Rs25 million or more, then 5% of its rate will be considered as an individual’s additional income.

He said that on this income, the government would charge a 1% tax. In case a person holds an immovable property for more than a year, then they will be charged with 15% capital gain tax, which will become 0% after six years, he said.

Ismail assured that the new coalition government will pull Pakistan out of the economic crisis: “We have done it before, we can do it, we will do it.”

The minister further added that in the next fiscal year, the country has to improve the economic conditions of the poor by providing them with facilities.

“When the income of the poor increases, they purchase consumer goods which are produced locally. And this, in turn, reduces the exports and initiates the development process. We can achieve inclusive growth by taking the above-mentioned steps,” he said.

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