Saturday, 11 June, 2022 I 11 Dhul-Qadah, 1443 I Rs 15.00 I Vol XII No 342 I 12 Pages I Karachi Edition
Government unveils ‘proGressive’ budGet with rs9.5tr outlay for year 2022-23 g
RARE SCENES IN NA AS HyBRID OPPOSITION LISTENS TO SPEECH CALMLy
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MIFTAH TARgETS OuTgOINg PTI gOVERNMENT IN BuDgET SPEECH
islamabad
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staff rePort
HE coalition government Friday unveiled what it called a ‘progressive’ federal budget for the next fiscal year 2022-23 in the National Assembly with an outlay of Rs9.5 trillion amid strict conditions of the International Monetary Fund (IMF) for the revival of the $6 billion loan programme stalled since months over policy breaches. Minister for Finance and Revenue Miftah Ismail introduced the Finance Bill, 2022 in the National Assembly aimed at giving effect to the financial proposals of the Federal government for the year commencing from the first day of July, 2022. Finance minister Miftah Ismail read out his speech, starting to blame the outgoing PTI government, saying it left the country’s economy in doldrums and hurt investor confidence by changing finance ministers and financial policies frequently. It was a rare scene as the entire budget speech was made in an orderly fashion as members of the ‘hybrid opposition’, comprising of mostly turncoats of PTI who have supported the government, calmly listened to the complete budget speech. The finance minister was of the view that the ruling coalition took over the country’s reins despite “the fact that it will have to take difficult decisions to save the economy” which may harm their respective parties’ popularity but they chose to keep national interest above party interest. Miftah Ismail, while presenting the budget proposals, said that out of total Rs9.502 trillion budget, an amount of Rs2,950 billion had been allocated for debt servicing and Rs800 billion earmarked for the Public Sector Develop-
ment Programme (PSDP 2022-23). He said an amount of Rs1,523 billion had been earmarked for defence expenditures, Rs550 billion for civil administration and Rs530 billion for pensions. Similarly, Rs699 billion had been proposed for providing targeted subsidies to the poor segments of society. Miftah said that owing to the high petroleum prices, people earning less than Rs40,000 will be given relief of Rs2,000 per month, which will continue in Fy23 budget as well. He said that taxes will be imposed on goods that are mainly consumed by the rich to provide relief to the common man and that the federal government has established a pension fund releasing Rs10 billion for it. Miftah Ismail said that Prime Minister Shehbaz Sharif wanted to extend maximum relief to the people, especially the poor during these difficult times. “For this purpose, the government has taken several steps to provide subsidy and assistance. However, the continuation of
this (relief) will require more resources,” he added. He emphasised on the need to impose special tax on higher income earnings in order to divert the resources to the poor people. “Our budget philosophy is to enhance agriculture production, especially the edible oil in order to reduce agricultural imports. We need to promote industries to bolster exports and earn valuable foreign exchange,” he added. This, he said, will help address the issue of balance of payments on permanent basis. The finance minister announced that owing to the high inflation in the country, the government has increased salaries for its employees by 15 percent, adding that the pensions have also been raised by 5 per cent. The minister said that FBR revenue has been estimated at Rs7,004 billion for the next fiscal year. “This includes Rs4,100 billion share of provinces. The net revenue with the federal govern-
ment will be Rs4,904 billion. The non-tax revenue will be Rs2,000 billion.” According to the government, this budget would lay “the foundation for future growth budgets” with its focus on exports and agriculture. 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 Rs6 lac to Rs12 lac per annum. The salaries of the government employees would increase by 15 per cent as well. 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 agri machinery, including tractors, along with seeds, will also be exempted from tax. As per the budget documents, 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.
The government also decided to raise the budget for the Higher Education Commission (HEC) by 67 per cent. It also planned to announce 5,000 scholarships for Balochistan students, additional scholarships for coastal areas of Balochistan, and provision of funds for state-of-the-art equipment to the education sector. The China-Pakistan Economic Corridor (CPEC) projects will be given additional funds to expedite their progress. The government planned to focus its attention on the early start of the Special Economic Zones under the CPEC, 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. In this budget, 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 Rs24 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 Finance Minister also laid before the National Assembly the Supplementary Demands for grants and Appropriations for the financial year 2021-22.
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Govt imposes Rs440b new taxes Budgeting on hope with focus on real estate islamabad
Khurram husain
islamabad shahzad Paracha
The federal government has imposed Rs440 billion new taxes with a focus on real estate sector, in the budget for next fiscal year 2022-23. In a media briefing, FBR Chairman Asim Ahmad informed that Federal Board of Revenue has proposed to impose Rs440 billion new taxes, which include Rs34 billion Customs duties, Rs90 billion Sales Tax and Federal Excise duty and Rs316 billion income tax. He also said that FBR has proposed to give relief tune of Rs85 billion in taxes to masses in next fiscal year. The net effect of the taxes would be Rs355 billion. According to Finance bill, government has proposed Rs316 billion new income tax measures for next fiscal year. The chairman said the FBR has proposed to impose 5% tax on income on non-productive immoveable as well as un-utilized residential/commercial/industrial plots and farm house. The FBR will give exemption of one property but it will deduct Rs25 million from other open plot, adding that FBR will collect Rs30 billion through this proposal. He also said that FBR has also proposed to increase 15 % capital gain tax from four to six years on immoveable
property and it is projected that we will collect Rs40 billion revenue. The chairman said that FBR has also proposed an increase in advance tax on purchase of immoveable property for non-filers from existing 2% to 5% and 1% to 2% for filers. He also informed that we will be able to collect Rs65 billion revenue in next year. Asim ahmad said that FBR has also proposed 1percent capital value tax from Pakistani living abroad on their foreign immoveable properties as well as liquid foreign assets. We have estimated that we will collect Rs18 billion tax from Pakistani living abroad. Asim ahmad said that FBR has proposed to enhance advance Income Tax above 1600 cc Luxury Vehicles. There will be Rs150,000 advance tax on 1601cc to 1800cc vehicles, Rs200,000 on 1801cc to 2000cc, Rs300,000 on 2001cc to 2500cc, Rs400,000 on 2501cc to 3000cc and Rs500,000 advance tax on above 3000cc vehicles. It is estimated that FBR will collect Rs10 billion taxes by this proposal. FBR has proposed Rs3000 to Rs50, 000 per month fixed tax for retailers (other than Tier-1) on electricity consumption. Retailers will pay Rs3,000 per month up to monthly electricity bill of
Rs30,000, Rs5,000 per month up to electricity bill of Rs50,000, Rs10,000 per month up to electricity bill of Rs100,000, Rs50,000 per month for special class including car dealers, precious watches as final tax liability on income & sales tax, he explained. FBR will also collect 2% Poverty Alleviation Tax on high earnings of all persons (Individuals, businesses,) income above Rs300 million. On the other hand, FBR has proposed to enhance limit for taxation of salary class from Rs600,000 t0 Rs1200,000 by reducing the slabs from 12 to 7. Chairman said that there will be no tax on income not exceed Rs600,000 whereas Rs100 tax where taxable income exceeds Rs600,000 but does not exceed Rs1200,000. It has also proposed to impose 7% tax on the amount exceeding Rs1.2 million but does not exceeds Rs2.4 million, Rs84,000 plus 12.5% on the amount exceeding Rs2.4 million but does not exceed Rs3.6 million, Rs234000 plus 17.5% on amount exceeding Rs3.6 million but does not exceed Rs6 million, Rs654,000 plus 22.5% on the amount exceeding Rs6 million but does not exceed Rs12 million and Rs2,004,000 plus 32.5% on the amount exceeding Rs12 million.
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If ever a budget raised more questions than answers, this is it. Just consider some of the numbers. Revenue collection is to rise by Rs1.175 trillion rupees of which Rs391 billion will come from direct taxes and Rs784 billion from indirect taxes. The total revenue to be collected from new tax measures is Rs355 bn. In direct taxes the bulk of the increase is budgeted from income tax (Rs387 bn), of which the new measures account for Rs316 bn. The revised slabs so far are a net revenue loss for the government, with much of the increase to come from hikes on banks’ net income, and other items like increase in tax on sale of cars of engine capacity above 1600ss. Likewise with indirect taxes. Paradoxically they are counting on a reduction of imports by almost $6 billion, while collections from customs duties are programmed to rise by Rs168 billion, of which new measures account for Rs34 billion. Rising custom duty collections in a time when imports are actually falling can only mean one thing: higher duty rates. But for now all the announcements only tell us where duty reductions have been applied. Nothing about what has been raised. Same story with with Sales Tax, the
other big head that comes under indirect taxes. Recoveries here are budgeted to rise by a whopping Rs570 billion, of which Rs90 billion is to come from new measures (this figure includes new measures under the FED). Once again, since most sales taxes are collected at the import stage, it is important to look at how they intend to make this happen while imports are supposed to decline. The only way would be to raise the rates on many products, but the only thing that was announced during the budget speech was those items where these taxes are going to be eliminated (such as solar panels). Next up check out the increase in collection under Petroleum Development Levy. Last year the government announced a target of Rs610 billion under this critical head, which sounded alarmingly high at the time and would have meant a sharp increase in the price of petrol by Rs30 per litre just on account of collections to meet this target. Of course they didn’t manage to collect even half of that amount because oil prices started climbing in July and then Prime Minister Imran Khan ordered a reduction in applicable taxes and levies to keep the retail price constant. Three PDL increases were announced from November to January, bringing it to Rs12 per litre, to satisfy the IMF.
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